The Bank of Canada has opted to hold its trendsetting interest rate at 1.75% in its October announcement. It is the eighth month in a row the central bank has chosen to leave its rate untouched, making it increasingly an outlier among developed nations; as global economic uncertainties have escalated, many other central banks have slashed their national cost of borrowing, including the U.S. Federal Reserve, which is expected to cut its rate once again later today.

These ongoing trade conflicts – mainly due to tensions between the U.S. and China – have indeed put a damper on the Canadian economy, especially its export sector and commodity prices. However, while it acknowledges “a growing number of countries have responded with monetary and other policy measures to support their economies,” the BoC is resisting the urge to cut rates, despite the strength holding out will lend to the loonie.

Leaving Room for Future Cuts

Much of the motivation behind the Bank’s inaction is to hedge its bets against an economic downswing in the near future. Talks of an impending recession grow louder, and it is anticipated that Canada’s economy will slow throughout the end of 2019 due to pain in the energy sector, and a fading of other factors that have temporarily boosted GDP. By keeping its rate untouched, the BoC has built in some padding should it need to counter these factors later on.

BoC Remains Optimistic About Canadian Economy

However, it remains optimistic that any slump should be temporary; business investment and exports are expected to rebound in 2020 and 2021 after contracting late this year, while government spending and a low cost of borrowing will keep consumer spending humming along. Employment and wage growth continue to strengthen and the housing market, which is a major economic contributor, continues to rebound across the nation, with an influx of new MLS listings and sales in most urban centres.

However, the BoC will keep an eye on whether today’s low-interest rate environment pose a risk to stable borrowing practices, as well as the fallout from the federal mortgage stress test, which was put in place at the beginning of last year to cool too-hot markets.

In all, the BoC projects GDP to grow 1.5% in 2019, and by 1.7% and 1.8% in 2020 and 2021, respectively. Inflation remains close to its 2% target, though will dip temporarily next year as softening energy prices trickle through the economy. With this in mind, the BoC believes holding its rate remains the appropriate course of action for the time being, but will observe how global conflicts impact our nation’s bottom line.

“Governing council is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist,” it states. “In considering the appropriate path for monetary policy, the Bank will be monitoring the extent to which the global slowdown spreads beyond manufacturing and investment. In this context, it will pay close attention to the sources of resilience in the Canadian economy – notably consumer spending and housing activity – as well as to fiscal policy developments.”

What Does This Mean for My Mortgage Rate?

The Bank of Canada trend-setting interest rate – also known as its Overnight Lending Rate – is used by the nation’s consumer banks to set their own variable cost of borrowing. This means, when the BoC cuts or hikes its rate, the banks will do the same regarding their variable mortgage and line of credit rates. As there was no change announced in today’s rate announcement, those holding variable mortgages will see no change in the near term to their monthly payments. As well, the pricing environment will remain stable for borrowers looking to apply for brand new variable mortgages, as well as those looking to renew or refinance their existing home financing.

While the Bank of Canada’s rate has no direct impact on fixed mortgage rates, its decision does influence them via its impact on the bond market; keeping the rate stable, and the loonie strong, signals that the Canadian economy is in good shape, which in turn makes government of Canada bonds fairly low risk investments. This keeps the price of bonds, as well as their pay-out yield, lower, which is a metric used by the banks in setting their fixed cost of borrowing. As a result, those looking to apply for a new fixed-rate mortgage, renew, or refinance, will likely enjoy well-discounted rates to choose from.

The next Bank of Canada announcement is set for December 4, 2019.

Some great tips for choosing the neighbourhood that’s right for you & your family when you’re buying a home,  from our friends at Zoocasa.

It’s tough to know which neighbourhood you should settle down in. In large cities, you might have dozens of options, each with their own pros and cons.

Before considering a number of factors, which we list below, ask yourself this question:

What do you want to do in your downtime?

Zoo Tip!

You might be the type of person who doesn’t care about their neighbourhood. If you’re single and spend a lot of time at home, the physical house or condo will be what’s important. Use your day-to-day and week-to-week activities as a launching point and go from there.

As obvious as it seems, your neighbourhood’s features exist for the time you’re not at work. When you wake up Saturday morning, what do you want to do? If you have small kids or a dog, you might want to live near a park. If you want to meet with friends, maybe you want nearby cafes and restaurants. If you spend a lot of time with your family, you night consider a neighbourhood close to them.

As much as you may like a certain street or the reputation a neighbourhood has, you need to think about what you actually do on your downtime and situate yourself in the midst of that.

Before you decide on an area, here are some things to consider.

How you get around

While you might like a large home on the outskirts of the city, and you could save money by living further away from downtown, if you walk or take public transit to get everywhere, that wouldn’t be the best decision.

Think about how often you walk, bike, and drive, and use that information when you’re shopping around for a home. Be honest with yourself when deciding if you’re willing to change your transportation habits for a neighbourhood.

Cost trade-offs

Consider a cost-benefit analysis when discussing neighbourhoods. For example, would you rather live in a two-bedroom, semi-detached home in Summerhill, or a four-bedroom, detached house in The Beach? You’ll get more space if you’re removed from the core, but the neighbourhood may be more desirable.

If you work in central Toronto, you know that commuting can take a good chunk of time out of your day. But living in Scarborough or Ajax will save you a ton of money, if you’re willing to spend extra time on the train or in your car each day.

Weigh time versus cost to determine which is more important to you, then work with your agent to choose the right area.

Outdoor space and recreation

While you can jog anywhere, other physical activities, like spin class or Crossfit, require specific facilities. If you have small children or a dog, a park is good for health and exercise. Think about pools, tennis courts, skating rinks, community centres, and other recreational resources.

And, like so many of the points on this list, be realistic—if you don’t swim already, you might be choosing a location based on something you’ll never use.

Zoo Tip!

If you have a certain church or place of worship and you don’t want to transfer to another, limit yourself to a reasonable distance.

Family and friends

If you have small kids and need regular babysitting help from your parents, you probably don’t want to be across town from them. If you see your friends often, buying a home in the same neighbourhood will make visits easier. But, in both situations, if you’re buying solely to be near the people closest to you, be sure they aren’t moving in the very near future, and that they actually want you to live nearby. (If you live beside your best friends, it could cause more problems than solutions.)

The bottom line, when choosing the neighbourhood you want to live in, is to weigh these factors with many others—type of home, school zones, home prices, etc. Don’t base your entire move on one factor or you could regret neglecting the others in due time.

School Zones

The quality of education your children receive should be at the top of your list. Read our article on the importance of school zones for a breakdown of what you should consider.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Some great insight on the realities of renting out part of your home to help with your mortgage from our friends at FNAT.

With high prices and tougher qualifying requirements home buyers continue to explore the viability of renting out part of their home as a way to boost income or subsidize mortgage costs. It is not uncommon and it is growing in popularity with younger buyers.

A survey conducted by one of Canada’s big banks found that 26% of home owners are, or are planning to rent out space. Of that group nearly one-third are renting out space in their primary residence. Among millennials nearly half are, or intend to be, landlords. Among those who are looking for a home right now, 54% of millennials says they would pick a property with a source of rental income, compared to just 25% of baby boomers.

But is it worth the trouble? The answer to that depends on attitude and expectations. The bank survey found that 80% of homeowners agree that renting out space in their home makes financial sense, but they value their time and privacy more.

Being a landlord is a 24/7 occupation. It may be called “passive income”, but you have to be willing to respond to tenant concerns on short notice and you have to be prepared for unexpected costs and maintenance. There can be financial stress.

Even those who have the temperament, though, need to give careful consideration to the financial benefits and legal responsibilities. The survey found that nearly three-quarters of landlord believe the tax advantages are worth it, even if the rental is losing money. This can be a misconception. It is important to know what you can deduct and what your tax obligations will be. Many fledgling landlords get a nasty surprise come tax time.

Using part of your home to generate income to help qualify for a mortgage can also be a tricky business. Lenders have varying criteria for how much real, or potential, rental income can be used in the loan application. By one common calculation, unknown as rental addback, a $1,000 a month suite in your home will net you just $195 a month in income on your mortgage application.

Oct 14, 2019
First National Financial LP

Some great advice from our family at DLC lending centres.

If you’re credit challenged but want to get into the housing market, it can be a tough road to hoe. But improving your credit to a point where a lender will give you chance, is very doable.

First, I won’t bore you with the detailed minutia of credit scores. Basically, what you need to know is a score above 680 puts you in a good position to get financing, while below will make it tough and improvement is needed.

Your credit score tells lenders some basic stuff about your credit: How long you’ve had credit, your ability to pay back that credit and how much you owe. And so your credit score is affected by how much debt you’re carrying in regards to limit, how many cards or tradelines you have and your history of repayment.

If you’re a young person and new to the world of credit, consider the 2-2-2 rule to help build up your credit. Lenders want to see two forms or revolving credit, like credit cards, with limits no less than $2,000 and a clean history of payment for two years. It’s also good to note, a great credit score will also include keeping a balance on all those cards at any given time below 30 per cent of the limit.and correct any old or incorrect reporting on your credit score by contacting Equifax to have it removed. Some people also forget their credit cards have an annual fee and fail to pay them off too.

This cannot be stressed enough, if you want to keep or attain a good credit score, you have to pay your credit cards or tradelines on time regardless of whether you owe $1 or $1 million.

There is a tendency when things get really bad to consider declaring bankruptcy or a consumer proposal. A consumer proposal is a formal, legally binding process to pay creditors a percentage of what is owed to them.

You really want to avoid these two options. Instead, there are companies out there that will perform the same function and negotiate your debts, but it won’t impact your credit or carry the stigma of bankruptcy or a consumer proposal.

Lastly, if you already own a home and have some equity, but you’re still drowning in credit debt, consider refinancing your mortgage. Sure, you might not get the great rate you have now or you might get dinged for breaking your mortgage early, but using the equity in your home to get rid of high interest credit payments could keep more money in your pocket at the end of the day.