BCREA Mortgage Rate Forecast

Mortgage rates to stay flat until next year

Canadian mortgage rates have held steady since the end of the second quarter, and we anticipate they will continue to do so over the next year. The yield on five-year Government of Canada bonds, a common benchmark for five-year fixed rate mortgages, remains very low and is forecast to rise gradually over the next year.

 

 

The last increase in the five-year fixed-rate came when the five-year bond yield was roughly 30 basis points higher than it is today. Given our forecast for bond-yields over the next year, the five-year mortgage rate is unlikely to rise from its current level of 5.24 per cent until early-to-mid 2013.

Moreover, banks and other lenders will likely be in no hurry to raise rates as moderation in the national housing market further intensifies competitive pressures.

 

The one-year and variable mortgage rates are also likely to stay flat over the next six months while the Bank of Canada remains on the sidelines. We are forecasting that the current one-year rate of 3.1 per cent will prevail until mid-2013 while the variable rate will hold steady at the current Prime lending rate of three per cent.

 

Economic Outlook

The Canadian economy stumbled in the third quarter of 2012, growing just 0.6 per cent at an annualized rate.

 

The economy is clearly feeling the effects of still sluggish US economic growth as well as a wider slowdown in the global economy. Canadian exports fell by two per cent last quarter, the largest decline since the 2009 recession. Exports may not fare much better next year as the global economy faces ongoing uncertainty. The US economy is at a fiscal crossroads and will likely see sluggish growth for another year. Much of Europe is mired in either recession or near zero growth and even the Chinese economy appears to be slowing down.

 

Against this backdrop, the Canadian economy should continue to produce consistent, if underwhelming, growth near two per cent in 2013, before accelerating in 2014.

 

Interest Rate Outlook

The biggest news out of the Bank of Canada this year had nothing to do with changes in monetary policy, but rather changes in personnel as it was announced that Bank of Canada Governor Mark Carney would be departing to helm the Bank of England. Some have compared the loss of Carney to the tragic memory of Canada losing Wayne Gretzky to the Los Angeles Kings in the 1980s.

 

However, like the powerful Edmonton Oiler teams of that decade, the Bank of Canada and the wider population of Canadian economists is rich in talent and replacing Carney with someone equally qualified should not be a problem.

 

Moreover, monetary policy in Canada is rules based, guided by a legislated inflation control mandate. Therefore, even the loss of a talented policy maker like Carney will likely have little impact on the path of Canadian interest rates.

 

The outlook for growth and inflation over the next eight quarters suggests that interest rates should start to tick higher around the middle of 2013. However, the Bank has been careful to note that a withdrawal of monetary stimulus will be contingent on a stable global economy as well as the state of household debt burdens. The Bank will likely be cautious in unwinding monetary stimulus if Canadian household debt, which has been growing at a more sustainable rate in the past few quarters, changes direction. We are forecasting that the Bank will leave its overnight rate unchanged through most of 2013 before raising rates by 25 basis points late next year.

 

Source: British Columbia Real Estate Association

In early 2013, both Economical Insurance and Family Insurance Solutions will stop offering earthquake insurance to home insurance customers living in parts of Metro Vancouver and southern Vancouver Island. Over the past 18 months, several other home insurance providers, including Aviva Canada, Intact Insurance and Wawanesa Insurance, have increased earthquake insurance rates and deductibles in BC. Several factors have prompted these changes, including:

• Earthquake risk models have been updated because of new geological mapping of earthquake fault lines and subduction zones along coastal BC;

• Damage and loss experience was worse than expected from the earthquakes that occurred in Japan, New Zealand and Chile over the past two years;

• More rigorous earthquake insurance guidelines, standards and requirements have been established by the Canadian regulators; and,

• Two powerful earthquakes occurred off coastal BC on October 28 and November 7, and measured 7.7 and 6.3 on the Richter scale, respectively.

"Clearly, many insurance providers are concerned about coastal BC's high earthquake risk," says Daniel Mirkovic, President & CEO, Square One Insurance. "It's not a matter of if, but when, an earthquake will hit. One way for providers to manage their risk is to limit the amount of earthquake coverage they offer. That means it may become increasingly difficult to get this much needed protection."

About 50% of BC residents buy earthquake insurance, which is most commonly sold as an add-on to home insurance policies. A few providers, like Square One, automatically include it in their base policies. If your provider no longer offers earthquake insurance, or if your earthquake rate or deductible has increased, the best thing you can do is shop around. The top two things you should consider when buying earthquake insurance are:

• What do you want to insure?

If you own a house, you can sometimes choose to insure just your building. While it may seem like a good way to reduce your premium, the reality is that the cost of replacing all your belongings can really add up. And if you own a condo, you should ensure you have enough protection for both your belongings and any assessment that may be made against you because of a shortfall in, or earthquake deductible for, your strata’s insurance.

• What deductible do you want?

You can typically choose from 2 or 3 earthquake deductibles. The higher the deductible you choose, the lower the premium you pay. While you may be tempted to choose the highest option available, you should keep in mind that earthquake deductibles are significantly higher than standard policy deductibles. That's because earthquakes occur less frequently than other types of losses, but when they do, they have the potential to cause significant damage to many homes.

All BC residents should take steps to prepare for an earthquake, exploring your earthquake insurance options should be one of those steps. To learn more about your earthquake insurance options, talk with your insurance provider or visitwww.squareoneinsurance.ca/earthquake-insurance.

Established in 2011 and based in Vancouver, British Columbia, Square One Insurance offers the only à-la-carte home insurance policy in Canada. That means you only pay for the protection you need. Square One is also one of the few providers to automatically include earthquake and broad water protection in its policy. No paying extra. For more information about Square One, or to get an online quote, visit www.squareoneinsurance.ca.

For more information, please contact:

Jason Vander Zalm
Square One Insurance Services Inc.

Tel: 778.331.6933 ext 103

Cel: 604.836.7937

jason.vanderzalm@squareoneinsurance.ca

Why is it so important to know how much you can afford to spend on a home?

Two reasons.

First, you don't want to buy a property and then find out, only after you’ve moved in, that you can't financially maintain it. That would mean having to resell it under stressful conditions.

Second, you don't want to settle for a property that's less than ideal, when you really could have afforded the "dream home" you've always wanted.

So how do you figure out how much you can afford to pay for your next home?

The first step is to talk to a good REALTOR®. He or she will help you gain a clearer understanding of how much your current home will likely sell for in today's market. That amount, together with other financial resources you might have (such as savings), will determine your down payment.

The next thing you’ll need to figure out is your mortgage. Your REALTOR® can help you find a lender who will take a variety of factors into account – income, credit rating, debts, expected down payment, etc. – to calculate the maximum amount of mortgage for which you qualify.

Say, through the proceeds of the sale of your home combined with your savings, your expected down payment is $90,000. If the lender authorizes a mortgage of $270,000, then you can afford a $360,000 home.

Of course, that doesn't mean you'll need to spend that much. In fact, a home that meets your needs in terms of property type, features, and neighbourhood, may in fact cost you less.

One thing is for sure. A good REALTOR® can work with whatever amount you can afford and show you homes on the market that most closely meet your needs.

Looking for a good REALTOR®? Call today.

Selling your property and buying a new home can be a potentially intimidating experience... so much so that these jitters may even prevent some people from making a move!

It doesn't have to be that way.

A big part of the stress of selling and buying comes from not understanding the process or having unanswered questions. You might worry about how the state of the market will affect the value of your purchase over the long term or what you would do if you found your dream home before receiving any offers on your current property.

That's where a good REALTOR® comes in. He or she can explain the process to you, answer all your questions, and show you how to make your move go smoothly.

Looking for a good REALTOR®? Call today.

BY PHILIP DUMOULIN, HGTV

Resale value is now always considered when a potential buyer is deciding upon a home to purchase. The ongoing debate is always - where is one’s money best spent to increase the value of the home? Budgets play a big part in a renovation and I see too many “all-in” renovations... In other words, homeowners blow their entire budget on one room and neglect the rest of the home. At “for sale” time this can leave a bad taste in a purchaser’s mouth, mainly due to the renovation of the one room having dated the rest of the home even more so. Unless you have an unlimited budget, here are some helpful do’s and don’ts that should assist you when coming to the renovation decision.

1. Never...ever...proceed with a cosmetic renovation when there are structural or plumbing/electrical issues with the home. I know these aren’t sexy fixes but they should always be a priority when doing renovations. Let’s face it, there is nothing worse than redoing your master en suite and then having a roof failure and water damage to the ceiling etc. I’m sure you have heard of the expression “good bones”...make sure you start any renovation with a solid foundation/structure.
2. The biggest mistake I see in renovations are the disconnects, an example being granite counter tops installed on 40 year old bathroom cabinets. You may consider this an upgrade but to a potential buyer they see this as putting “lipstick on a pig”. If you are trying to sell the bathroom as updated, good luck, no buyer will pay for poor renovations, especially when they have to be completely redone.
3. On a limited budget? Be smart! – consistent renovations are by far the best bang for your buck. In other words, do some mild updating in all of the rooms. You would be surprised how fresh a home looks with new paint, light fixtures/switches and modern baseboards. In most cases, for the average size home this will cost under 10K but it will most certainly add value when it comes time to re-sell.
4. Changing a traditional floor plan of a home and creating a more functional one is great for resale. Tearing a wall out can create that “open concept layout” one desires and it doesn’t have to be expensive.
5. Timeless design – when renovating, choose styles and fixtures that will remain current, what you like may not be appealing to the masses.
6. The kitchen is always the most expensive room in the house to renovate, so proceed cautiously! It can make or break the resale of the home so choose your layout, design and fixtures with care and hiring a designer for input, wouldn’t be the worst decision one could make.

So remember to always have a plan before starting a renovation. There is nothing worse than a half finished kitchen and no money left in the budget to finish it!

Can a draft through a window or door cause damage? It can. Damage to your bank account!

A single, seemingly minor, draft through a window can increase your energy bill by as much as 3%. In addition, a damp draft can make a room feel colder than it really is, while a dry draft can cause dry throats and skin.

So it pays to pay attention to drafts in your home.

Drafts are most commonly found at windows and doors, but they can also occur through walls with poor or old insulation.

Ideally, a draft should be eliminated through a repair or renovation (such as replacing old windows.) When that's not possible, there are a variety of products available that will help you stop drafts in the short term – such as replacement insulation strips for doors.

Visit your local home improvement centre. They can recommend products and solutions that can help your particular issues.

New Home Purchases

 

 

 

On February 17th, 2012 the Government announced the new housing transitional rules for returning to the PST. Below you will find information, and links to the Canada Revenue Agency's notice with the Q&As on these rules.

 

The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will generally all pay a consistent and equitable amount of tax. The transition rules provide certainty for new-home construction and sales, particularly during the transition period.

 

• B.C.’s portion of the HST will no longer apply to newly built homes where ownership and possession transfer on or after April 1, 2013.
• While PST will not apply to the purchase of new homes, builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s purchase price will again be embedded PST.
• The temporary housing transition measures will be in place for two years, until March 31, 2015.
• A new temporary housing transition tax of two per cent will generally apply to purchasers of new homes where at least 10 per cent of construction has begun before April 1, 2013, and ownership and possession transfer on or after that date.

The temporary housing transition tax and the temporary housing transition rebate for builders will be administered by the Canada Revenue Agency on behalf of B.C.

 

For newly built homes where construction begins before April 1, 2013, but ownership and possession transfer after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers during the transition between HST and PST and will help mitigate distortive market behaviour. Eligible builders who have paid PST on at least some of the construction materials incorporated into the new housing will receive a transition rebate that helps to offset the PST and helps prevent double-taxation on homebuyers.

 

The act covering the temporary housing transition tax and the temporary housing transition rebate comes into effect on December 1, 2012.

 

Under a newly passed regulation, builders are required to provide specific tax-related information to purchasers to ensure a shared understanding of the taxes and rebates that are included in the contracted purchase price and that apply under the transition rules. Builders who fail to disclose the required information may incur a penalty.

 

• Average amount of embedded sales tax in newly built homes under PST: two per cent.
• Provincial portion of the HST paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
• Temporary provincial transition tax rate on a newly built home during transition: two per cent.

 

The B.C. new housing rebate threshold has been increased to $850,000, meaning more than 90 per cent of newly built homes may now be eligible for a provincial HST rebate of up to $42,500.

 

It is important to note that the HST does not apply to resale housing.

 

Raising the B.C. HST rebate threshold to $850,000 is expected to save purchasers about $60 million in 2012-13.

The maximum value rises to $42,500 from $26,250, a 60 per cent increase.

 

To help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 are now eligible to claim a provincial grant of up to $42,500 effective April 1, 2012. The Province is administering the grant for new secondary vacation and recreational homes.

 

 

Related Links:

Comprehensive CRA Q&A's on the transition tax, transition rebate, and enhanced new housing rebates: Notice 276: Elimination of the HST in British Columbia in 2013 - Transitional Rules for Real Property Including New Housing.

Ministry of Finance Factsheet: New Housing Transition Tax and Rebate Act and Vendor information Requirements

Tax Information Notice: Enhanced New Housing Rebates and Transitional Rules for the Re-implementation of the British Columbia Provincial Sales Tax. This provides a broad overview of the transitional rules for new housing. For final, specific rules, see the New Housing Transition Tax and Rebate Act and the regulation to the act. In case of any discrepancy, the act and regulation supersede the notice.

Grant for New Secondary or Recreational Residences

B.C. HST New Housing Rebate threshold increase

Application for First-Time Home Buyers' Bonus

 

More Information

If you have questions regarding eligibility requirements for the enhanced new housing rebates or new rental housing rebates or about the application of the B.C. transition tax or B.C. transition rebate, please call the Canada Revenue Agency at 1‐800‐959‐8287 (English) and 1‐800‐959‐8296 (French) or go to:

http://www.cra-arc.gc.ca/E/pub/gi/notice276/README.html

http://www.fin.gc.ca/n12/12-017-eng.asp (English)
http://www.fin.gc.ca/n12/12-017-fra.asp (French)

There is no doubt about it! Even if the weather is relatively pleasant, your home won’t show as well in the winter as it would in the summer, especially from the outside. Fortunately, there are many ways to make your home look more attractive and appealing to buyers during the winter season.

First, before showing your home to a potential buyer, clear your front walkway. Make sure fence doors and gates open freely. Also, clear off the backyard deck or patio area. You want buyers to be able to explore around your property without any obstructions.

In short, do everything you can to make the experience of walking up to your front door and around your property as pleasant as possible.

Second, clear away any boots, shoes and other outerwear from the front foyer. You want buyers to focus on your beautiful home, not a cluttered entranceway. Also, have mats on both the outside and inside of your main entranceway. This will give buyers – as well as you and your family – a chance to wipe their boots and shoes.

Next, adjust your thermostat. You want your home to feel warm, cozy and comfortable for potential buyers.

Finally, remember that in the winter, homes show much better during the day. In the evening, it may be too dark to fully appreciate your property. So work with your REALTOR® to schedule viewings during the day whenever possible. If you can, also have pictures of your property available that showcase what it looks like in the summer. That takes planning. So if you're even just casually thinking of the possibility of selling your home, take some good "summer" pictures.

And one more thing... Ho Ho Hold the Christmas decorations! This falls under the category of clutter and you have to keep in mind that people of other faiths may be viewing your home!

Want more advice on how to sell your home in the winter? Call today.

Home Warranty Insurance

Requirements for New Homes

To increase consumer protection for new home buyers, the Homeowner Protection Act regulations for residential builder licensing and mandatory, third-party home warranty insurance were implemented on July 1, 1999. As a result, all new homes constructed with building permits applied for on or after July 1, 1999 must be built by residential builders licensed with the Homeowner Protection Office (HPO) and covered by a policy of home warranty insurance. In geographic areas where building permits are not required, licensing and home warranty insurance is required for new home construction commenced on or after July 1, 1999. Home warranty insurance can only be provided by insurance companies that have been approved by the Financial Institutions Commission (ficom) and meet the requirements of the Homeowner Protection Act. See the HPO’s online guide entitled Guide to Home Warranty Insurance in British Columbia for further information. Standards of coverage, commencement dates, exclusions and limits on coverage are now set by government to ensure clarity and a consistent base-level of consumer protection.

Minimum Standards of Coverage Required: 2-5-10

Home warranty insurance on new homes includes a minimum of 2 years on labour and materials (some limits apply), 5 years on the building envelope, including water penetration, and 10 years on structure.

The 2-year labour and materials coverage is broken down as follows:

Any defect in materials and labour:
• 12 months on detached homes and on noncommon property in strata units (includes fee
simple homes)
• 15 months on common property of strata
buildings

Defects in materials and labour related to the delivery and distribution systems (electrical, plumbing, heating ventilation, air conditioning, etc.):
• 24 months for all buildings.

Commencement Dates:

Commencement dates on home warranty insurance are:

Fee simple (primarily detached dwelling units):
• Custom homes: date of first occupancy or date of first occupancy permit, whichever transpires first.
• Spec. homes: Date of first occupancy or date of transfer of legal title to first owner, whichever transpires first.

Strata homes:
• Strata unit: earliest of date of first occupancy or date of transfer of legal title to first owner.
• Common property: earliest of date of first-unit occupancy in strata building or date of transfer of legal title to first owner in building

Home Warranty Insurance Exclusions

The Homeowner Protection Act regulations specify what the home warranty insurance companies can exclude from their policies.

General exclusions can include: landscaping; nonresidential detached structures (however, parking structures, recreational and amenity facilities in multi-unit buildings are covered); commercial use areas; roads, curbs and lanes (however, driveways are covered); site grading and surface drainage; the operation of municipal services; septic tanks and fields; and water quality and quantity.

Defect related exclusions can include: normal wear and tear; normal shrinkage of materials from construction; use of new home for non-residential purposes; materials, labour and design supplied by the owner; damage caused by anyone other than the residential builder; damage caused by insects or rodents; failure of an owner to prevent or minimize damage and acts of nature.

Homeowners can search the HPO’s online Residential Construction Performance Guide to help determine whether a possible defect in design, labour or materials in their new home may be covered by home warranty insurance. Visit the HPO website to view this guide.

Limits on Coverage

Coverage on claims is as follows:

Fee simple (primarily detached dwelling units):
• The lesser of the first owner’s purchase price or $200,000.

Strata homes:
• Strata unit: lesser of the first owner’s purchase price or $100,000.
• Common property: the lesser $100,000 times the number of dwelling units in the building or $2.5 million per building

While this article by Barbara Corcoran, who you may recognize as one of the investor's on the tv show Shark Tank, refers to the American housing economy in 2009, it can also be applied to the current housing situation in BC, where sales have slowed considerably. These are great tips that can help you get a good deal in this Buyer's market!

Cash in: Tricks for buying a home at the bottom

Barbara Corcoran shares insider tips to help homebuyers in this market

While others argue over whether this really is the bottom, savvy buyers are taking advantage of the best market in years to purchase a home. If you’re an aspiring homeowner, here’s the know-how you need to snatch up a bargain — where to look, what to watch out for, and how to get financing that will make your home-ownership dreams come true. 

The best kinds of homes to look for

1. A property with a clear ending! That is, a clear ending when it comes to estates, trusts, divorces and foreclosures.

2. A seller in trouble. Sellers who are behind on their property taxes, have a failed business or just need cash.

3. A scorned homeowner. Just like a scorned lover, the homeowner had another buyer who just backed out. They will almost always sell the house for even less.

4. A shopworn listing. A home that’s been on the market for more than 60 days or a home that’s had numerous or aggressive price drops always signals a good deal to be had.

5. A home with an overgrown yard. It always means the homeowner is ready to give up. 

6. A vacant home. No one likes to pay a mortgage on an empty house.

Some don’ts to keep in mind

7. Don’t go for a short sale unless you have plenty of time. They can drag on and on because of the bidding process and you can end up paying the same money or more, with all the increased costs, repairs and the rise in interest rates, while waiting to close.

8. Don’t compromise on what you’re looking for just to get a “good deal.” It’s no deal if it doesn’t meet the criteria you want in your home.

Insider tips to spot the seller ready to take a low bid

1. Check the closets. See if the wife’s or husband’s clothes are no longer there.

2. Check the tax records. Find out how much the seller owes. You can get the records at the county clerk’s office, and in some municipalities the town records are online.

3. Look for give-away words. In advertising, words like “bring offer” or “drastically reduced” mean exactly that.

4. Ask your agent to pull the listing history on the house. It includes how many times the home has been listed and what the price reductions have been.

5. Let the seller talk! If the sellers are home at the showing, let them talk. Often they’ll say more than they should, like, “We close on our new home next month.”

How to get the financing you need as a buyer

1. Order the house appraisal first. The appraisal may come in lower than the price you plan to bid!

2. Ask the seller to pay part of your closing costs. It reduces the cash you need up front.

3. Ask not-for-profit organizations about financing. They’re good advocates for consumers who otherwise get overlooked or taken advantage of by major banks and mortgage companies. Check out NACA (Neighborhood Assistance Corp. of America), NHS (Neighborhood Housing Services) in your part of the country, and ACORN.

4. Review your own credit report early. Correct any errors in the report and fix everything possible before you shop for a home.

5. Ask for owner financing. Many older homeowners are not buying another home and like the idea of a steady 5 percent return using their old home as collateral.

6. Ask for a family contribution. Many parents are very happy to help the first-time homebuyer and their grandchildren secure their first home.

7. Prequalify for financing with your lender or mortgage broker before you begin your search. 

8. Don’t take no for an answer. If you’re turned down by a local bank, you may still be approved by a national mortgage lender. If you’re turned down by a national lender, you’re often approved by your local bank.

ShoeString Home Staging