When it comes to understanding mortgage rates and their impact on monthly payments, many Canadian borrowers have room for improvement.
That’s according to the findings of a survey conducted by The Real Estate and Mortgage Institute of Canada (REMIC).
The survey found that a majority of Canadians (59%) couldn’t cite the current Bank of Canada overnight rate, which currently stands at 5%.
Nearly three quarters (68.4%) said they didn’t know what their payments would be if the Bank of Canada’s overnight rate reached 5%—its current rate.
“Our survey is clearly showing that Canadian homebuyers need to educate themselves more on the basics of taking on a mortgage and its lasting financial impact,” Joe White, President and CEO of REMIC, said in the release. “This is exactly the kind of information that they would be getting from a licensed mortgage broker and a big part of the advantage of using a broker to secure a mortgage.”
The survey also revealed that roughly one in five Canadians (21.8%) feel interest rate hikes have made their mortgage unaffordable, while more than a third (34.1%) say they regret the mortgage they are currently in.
Another 30% said they would have chosen a less expensive property if they knew that mortgage rates would rise.
Housing starts down 10% in July: CMHC
The annual pace of housing starts fell 10% in July, according to data released this week by the Canada Mortgage and Housing Corporation (CMHC).
The seasonally adjusted number of starts totalled 254,966 units, down from the 283,498 reported in June. This figure was slightly below economists’ projection of 260,000 total starts.
Despite the decline, national housing starts remain 7.4% higher than the 5-year average.
“Even with the decline from June’s lofty pace, starts held at a firm level last month,” noted TD Economics’ Rishi Sondhi.
“…looking at the 6-month average shows that starts remain well above pre-pandemic levels, and have picked up some steam in recent months,” she added. “That said, they are well off their peaks from late last year, driven by lower construction of single-detached units.”
Declines in starts were reported in Toronto (-29%) and Vancouver (-23%), while starts were up in Montreal (+12%), Calgary (+33%) and Edmonton (+67%).
Mortgage arrears rate holds steady in June: CBA
Canada’s national mortgage arrears rate remained unchanged for the fifth consecutive month, according to data from the Canadian Bankers Association.
The arrears rate, which tracks mortgages that are behind payments by three months or more, held firm at 0.15%, where it’s been since February. That works out to just over 7,600 mortgages in arrears out of a total of nearly 5.1 million.
This remains well below the highs seen during the pandemic, when the arrears rate reached a peak of 0.27% in June 2020. The rate is highest in Saskatchewan (0.57%) and Alberta (0.32%), and lowest in Quebec (0.11%) and Ontario (0.08%).
Scotiabank unveils its First-Home Savings Account
Scotiabank announced this week that its tax-free First Home Savings Account (FHSA) is now available to clients.
The new registered plans allow first-time homebuyers to save up to $40,000 for the down payment on their home on a tax-free basis. Similar to the Tax-Free Savings Account (TFSA), funds in the account can be placed in a variety of investment vehicles, and can then be withdrawn tax-free as long as the funds are used for a qualifying first-home purchase.
“We know home affordability is a big issue on the minds of Canadians,” Kingsley Chak, Senior Vice President of Retail Deposits, Savings, and Investments at Scotiabank, said in the release. “The FHSA unlocks tremendous value and flexibility for those looking to save for a down payment toward their first home.”
Scotiabank’s FHSA can be opened in-person at a branch or by calling 1-855-208-1564.
Fed minutes show officials were divided over the July rate hike
Officials at the U.S. Federal Reserve disagreed over the need for additional rate tightening at the central bank’s July 25-26 meeting, where the committee ultimately unanimously raised rates by a quarter point.
Minutes from the last policy meeting indicate that a “couple” members were in favour of leaving rates unchanged. “They judged that maintaining the current degree of restrictiveness at this time would likely result in further progress toward the Committee’s goals while allowing the Committee time to further evaluate this progress,” the minutes read.
Officials also noted that despite GDP growth remaining above 2% for the past four quarters, a “gradual slowdown in economic activity nevertheless appeared to be in progress…”
BMO economist Michael Gregory noted that if “meaningful progress” is made on slowing economic and employment growth, “September’s likely rate hike skip could morph into a more permanent pause.”
However, the minutes also indicate that Federal Reserve members remain open to the possibility of additional rate hikes if needed. “With inflation still well above the Committee’s longer-run goal and the labour market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the minutes read.