News Update: CityNews – September 17th

Clinton Wilkins joins Dan Ahlstrand on City News to chat about the Canadian government announcement of changes to mortgage rules, to help first-time homebuyers, effective December 15th!

The price cap for insured mortgages increased from $1 million to $1.5 million, and the 30-year mortgage amortization was expanded to include all first-time buyers and those purchasing newly built homes

Dan Ahlstrand
Welcome back to the Todd Veinotte show! I’m Dan Ahlstrand along with you here on a Tuesday morning. If you were following the news yesterday, you heard from Ottawa that Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians purchase their very first home. This article is on our website halifax.citynews.ca. She says changes will come in force in December and better reflect the housing market. The price gap for insured mortgages to be boosted for the first time since 2012 moving to one and a half million from the million dollars to allow more people to qualify for a mortgage with less than 20% down. The government will also expand its 30 year mortgage amortization to include first time home buyers buying any type of home, as well as anybody. Anybody buying a newly built home on August 1st, eligibility for the 30 year amortization was changed to include first time homebuyers buying a newly built home. That’s the big change. And as I mentioned before the break, when it comes to mortgages there’s really only one set of numbers I dial, and that’s for Team Clinton and Clinton Wilkins team. How are you?

Clinton Wilkins
Thanks for having me, Dan. How’s your day going?

Dan Ahlstrand
So far so good! Tell me a little bit about this. How big a deal is changing these rules to allow first time homebuyers buying any type of home?

Clinton Wilkins
Let me tell you, it was a busy day yesterday, very exciting in our industry, and very exciting for our clients as well. I think so many first-time homebuyers, Dan, are really having a hard time, breaking into the real estate market. And this is really showing the commitment from the federal government to support young people! As we know, housing and someone’s home often is the biggest purchase of their life, and it’s their biggest asset. And typically, homeowners are able to build wealth faster than those that are renting. So this will enable more for some homebuyers to get into the market. And you know, there’s going to be a lot of new construction happening across our country. The federal government is trying to get a lot of new home starts going. And, I think it’s gonna be positive for first time homebuyers. And I think it’s gonna be positive for people that have owned a home in the past and are looking to buy a new home. They will have 30 years to pay their mortgage back. You know, I think there can be some people that would argue to say, we’re going the other direction now and making it easier for people to get into homes. But, I think that’s really the message that the federal government is sending here.

Dan Ahlstrand
How big of a difference does it make Clinton? From increasing the the amortization cap from, say, like 25 to 30 years. How big of an impact monthly does that have? I guess it based on the size of the loan.

Clinton Wilkins
Exactly it would be based on the amount that the borrower is going to borrow. But it does make a big difference in terms of qualification. We need to remember that we are still qualifying everyone with a stress test, which means that we’re qualifying them right now on 2% above their contract rate. So having a longer amortization will enable a borrower to buy a more expensive home, and really it may just enable them to get into the market at all. And I think that’s really what’s the most important thing that we need to remember. Yes, they have increased the maximum cap from 1 million to 1.5 million. I don’t know if that’s really going to move the needle here in Halifax and Nova Scotia, but it certainly is needed in other areas like Ontario, and BC. There are very few high ratio insured mortgages being done in those marketplaces. Compared to us here locally, many first time homebuyers are putting down that minimum down payment, which is 5% on the first $500,000 and 10% above that $500,000 mark. So I do think it’s going to move the needle. Right now, the average house price in Halifax is around $570,000, and that means that a household, before this change, needed to make in excess of about $125,000 to be able to just break into buying an average home. Now, with the amortizations going up to 30 years, it will enable more borrowers to break into the market even at that average price point, which I think is very, very good. Now these changes, Dan, are not coming into effect until December 15th, so I think it’s a good time to get excited. It’s a good time to get pre approved and figure out, what you can afford, and do you need to wait to be able to get a 30 year amortization, or does it work now? So I’ll tell you kind of where my concern does lie. And we’ve talked about this before on our show with Mortgage 101. Typically, as the rates go down, there’s going to be more competition in the market. I do think that there’s a lot of borrowers sitting on the sidelines waiting for rates to go down, and I think the more competition that there is, we’ve limited inventory in our marketplace, it’s going to start driving the prices up again.

Dan Ahlstrand
Clinton, is there any restrictions on this new program? And the reason why I’m asking that is, let’s just say that there’s somebody out here listening to us today, or listening to Mortgage 101, on the weekends or online, that is saying in their early 50s and has never owned a home before. Will you take a mortgage out on somebody that at that age, with 30 years, they’ll be like 83 before they’ll pay it off.

Clinton Wilkins
There’s no age restrictions, so someone at any age can buy a home. I can tell you, we’ve had retirees buy homes and take 25 and 30 year amortizations. The bank has no limitation on that. So that’s not a problem at all. But I think it’s almost a contrary. I think there’s a lot of people going into retirement age that are leveraging their homes or buying homes and taking out a mortgage. You know, right now, oftentimes taking the mortgages is less expensive than renting. So you know, if we’re looking at it that way, it’s really just about cash flow, so there’s no restrictions. There are a couple interesting caveats that the federal government does place on what a first time homebuyer is. So our listeners might be interested to know this. So if anyone’s gone through a separation or a divorce and they’ve owned a house in the past, as long as they had paid back their homebuyers incentive, you know, their RRSP withdrawal, if they participate in that program, they would be considered a first time homebuyer again. So there are some interesting caveats as well to the program. So a first time homebuyer could buy a new construction or resale home. So I think that’s an important change that we certainly want to highlight.

Dan Ahlstrand
I caught Mortgage 101, on the weekend Clinton. And, you know, a great information in there, as always, but that being said, this time of the year, with the mortgage rate starting to fall, is this a good time, or should we wait until we see what the Bank of Canada is going to do in its next update?

Clinton Wilkins
Well, I think that’s really interesting. We’re almost at the end of the fiscal year for the bank. So I think that’s something interesting to take into account. We do have an encore presentation of Mortgage 101, here this weekend. So if anybody missed it last weekend, you can certainly tune in, Saturday at 11, and Sunday. So based on the fiscal year being October 31st, many lenders, I’ll say, and I’m going to use this as an air quote. I know no one can see me air quoting, but I think some mortgages are on sale. So if you’re looking to do a transaction and you can fund it quickly, ie., in 30 days or before the end of October. There are some very aggressive pricing that’s available from several lenders right now. So I think it’s an interesting time to do business. It’s kind of like, going back to school, and maybe it’s a good time to get a cell phone, or maybe that’s at Boxing Day. Right now is the prime time, I think, to get mortgage lending, especially prior to October 31st. I think the rates are going to continue to go down, but there certainly are some great specials available right now.

Dan Ahlstrand
The time is, is right when it’s right? I mean, that’s hard to describe, but it’s, it’s based on individuals and their current situation. You’re not gonna say, well, wait till February 12 of 2025, because that’s the perfect time to buy.

Clinton Wilkins
It’s impossible, no. And you know, people are doing mortgages all the time and at any rates. So even if we’re looking back over the last 12 and 24 months, the rates did peak in somewhere, almost in that 7% range, we are still doing transactions every day. Because we need to remember, people are buying and selling homes, their mortgages up for renewal and they need to refinance. So transactions are happening all the time, and the right time for someone is the right time for them. You know, right now, if there is an opportunity with transaction, yes, I’m saying that there’s some good pricing available, but not for everyone. But if it is, I would certainly encourage everyone to reach out to an unbiased mortgage professional. The best advice comes from a mortgage broker!

Dan Ahlstrand
Clinton. We only have about a minute or so left. How’s the market looking right now with these changes, or is it starting to heat up? Are we seeing people buying now?

Clinton Wilkins
We’re certainly seeing more transactions. I did read some stats that came out of Nova Scotia, Association of Realtors, saying that there’s certainly more sales that happened in August, but there’s also more listings. So I think it’s becoming more of a balanced market out there. I can tell you from the transactions that we participated in and obviously doing the financing, I think that buyers and sellers are becoming a little bit more negotiable. You know, they’re meeting somewhere in the middle. We’re not seeing these situations where there’s 20 offers on a property, like we were in those covid times. The busiest market though, Dan, is the sub $500,000 which really tells me that the first time homebuyers are the most active right now. And I can tell you from our practice, we certainly have a lot of first time homebuyers pre approved. And the biggest challenge that I hear from these guys is there’s very limited listings, kind of under that $500,000 price point. So that is the most active, typically the higher priced property, so like $600,000 plus, those ones seem to be sitting on the market for a longer period of time.

Dan Ahlstrand
Clinton is always a pleasure!