What's New at Axis

In its latest announcement, the Bank of Canada has maintained its target interest rate at 4.5% in April. The decision comes as no surprise to analysts who have been closely monitoring economic indicators, including the impact of the COVID-19 pandemic on the Canadian economy. Here, we take a closer look at the reasons behind the Bank's decision and what it means for consumers and businesses alike.

Economic Landscape

The Canadian economy has been on the road to recovery since the pandemic-induced recession in 2020. However, the Bank of Canada notes that the recovery has been uneven across different sectors and regions. While some sectors have fully recovered, others continue to face challenges, particularly those that are dependent on international travel.

At the same time, inflation has been on the rise, driven in part by supply chain disruptions and rising commodity prices. In March 2022, the consumer price index (CPI) rose by 3.2% compared to the same period last year, well above the Bank's target inflation rate of 2%.

Reasons for the Bank's Decision

The Bank of Canada's decision to maintain its target rate at 4.5% is based on a number of factors. The Bank recognizes that the economy is recovering, but the unevenness of the recovery and uncertainty around the evolution of the COVID-19 pandemic continue to pose risks to the economic outlook.

The Bank also notes that inflationary pressures have increased, but it believes that these pressures are largely transitory and should ease over time. In addition, the Bank is closely monitoring the housing market, which has been a key driver of economic growth, but also a potential source of financial instability.

Implications for Consumers and Businesses

For consumers, the decision to maintain the target rate at 4.5% means that borrowing costs will remain relatively low. However, with inflation on the rise, consumers may experience higher prices for goods and services in the near term. At the same time, savers will continue to face low returns on their investments.

For businesses, the decision to maintain the target rate at 4.5% means that borrowing costs will remain low, which should support investment and growth. However, businesses should also be prepared for higher input costs due to rising inflation.

Conclusion

In conclusion, the Bank of Canada's decision to maintain its target interest rate at 4.5% in April is a reflection of the uncertain economic landscape and the risks posed by the COVID-19 pandemic. While the economy is recovering, the unevenness of the recovery and inflationary pressures continue to pose risks. Consumers and businesses alike should monitor economic indicators closely and be prepared for potential changes in the economic landscape. If you are looking for an opportunity to purchase a new townhome, and take advantage of the stabilized interest rates, now is the time! By getting pre-approved now, you stand to save tens of thousands of dollars in financing over the lifetime of your mortgage. Contact your favorite builder today to get started.

The 2023 federal budget has a strong focus on supporting Canadians through the ongoing COVID-19 pandemic and building a resilient economy for the future. As a result, several measures have been introduced that will impact the mortgage industry and Canadians who are looking to purchase or refinance a home.

Changes to the First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive (FTHBI) has been expanded to support more first-time homebuyers. Under the new budget, the maximum qualifying income for the FTHBI has been increased from $120,000 to $150,000. This means that more Canadians will be eligible for the program and will be able to receive up to 10% of the purchase price of a new home or 5% of the purchase price of an existing home, as a shared equity mortgage with the government.

The maximum purchase price for a home under the FTHBI has also been increased to $789,000 in the Greater Toronto Area, Vancouver, and Victoria. For the rest of Canada, the maximum purchase price remains at $565,000.

Introduction of a Tax on Foreign Buyers

To address concerns about housing affordability, the budget has introduced a new tax on foreign buyers. Effective immediately, non-residents who own Canadian residential property will face an annual 1% tax on the property's value. This tax is aimed at deterring foreign buyers from driving up housing prices and making homes more affordable for Canadians.

Changes to the Stress Test

The mortgage stress test is a measure that ensures borrowers can afford their mortgage payments even if interest rates increase. The stress test has been a requirement for all insured mortgages since 2016, and for all uninsured mortgages since 2018.

Under the new budget, the stress test has been adjusted to account for inflation. The benchmark interest rate used to qualify for a mortgage will now be based on the average contract rate plus 2%, or the Bank of Canada's 5-year benchmark rate, whichever is higher. This change will make it easier for some Canadians to qualify for a mortgage.

Impact on Mortgage Rates

The 2023 federal budget is not expected to have a significant impact on mortgage rates in the short term. However, the introduction of the foreign buyers' tax could potentially have an impact on housing demand and, in turn, interest rates.

Conclusion

The 2023 federal budget introduces several measures that will impact the mortgage industry and Canadians who are looking to purchase or refinance a home. The expansion of the First-Time Home Buyer Incentive, the introduction of a tax on foreign buyers, and changes to the stress test are all aimed at making homes more affordable and supporting a resilient economy.

As a potential homebuyer or homeowner, it is essential to stay informed about these changes and how they may affect you. By staying up-to-date on the latest developments in the mortgage industry, you can make informed decisions about your financial future.

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February 2023 CREA report: National home prices and sales up from January

At Rockford Developments, we have been keeping a close eye on the Canadian real estate market, and we are excited to share our latest findings with you. In this article, we will provide highlights from the February 2023 Canadian Real Estate Association (CREA) report and how it compares to January's results. Check it out:

National Home Prices on the Rise According to the CREA report, national home prices rose by 2.3% in February, compared to January. This increase is due to the strong demand for homes in major Canadian cities, combined with limited supply. The average price of a Canadian home is now $696,000, a significant increase from last year's average of $627,000.

Sales Up from January The CREA report also revealed that sales increased by 8.6% in February, compared to January. This increase is partly due to the drop in interest rates, which makes it more affordable for Canadians to buy homes. However, the increase in sales is also due to the limited supply of homes on the market, which has created a sense of urgency for buyers.

Regional Variations While home prices and sales increased on a national level, there were significant regional variations. Toronto and Vancouver, for example, saw a significant increase in both home prices and sales, while other cities such as Edmonton and Calgary saw a decline in prices.

Implications for Homebuyers and Investors The rise in home prices and sales has significant implications for both homebuyers and investors. Homebuyers may find it more challenging to afford a home, especially in major Canadian cities. As a result, some buyers may choose to look for homes in more affordable areas or wait for prices to drop.

For investors, the rise in home prices could present an opportunity to earn a significant return on investment. However, investors must carefully consider the market conditions in each city before making a purchase.

Overall, the February CREA report showed a significant increase in both home prices and sales. While this is good news for sellers and investors, it may present challenges for homebuyers, especially in major Canadian cities. Our team will continue to monitor the Canadian real estate market closely and provide you with the latest updates.