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March 30,2022

Sam Ansari 0 Comment
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Ontario hits foreign homebuyers with 20% tax

Ontario is raising a tax on home purchases by some foreigners to 20% and making it harder to avoid as it tries to cool a scorching real estate market.   

The so-called speculation tax will apply to homes bought anywhere in the Canadian province by foreign nationals and foreign companies, provincial Finance Minister Peter Bethlenfalvy said in a statement Tuesday. Currently, the tax is 15% and applies only to homes in Toronto and surrounding areas.  

The soaring cost of homes and rents has become a significant political issue in the province of about 15 million people, and Ontario Premier Doug Ford faces an election in June. In Toronto, the average sale price in February was CA$1.3 million, seasonally adjusted. 

Since the pandemic started, even small cities and towns, far from Ontario’s major cities, have seen huge increases in home values as buyers took advantage of ultra-low mortgage rates.

The benchmark price of homes in the London and St. Thomas region, about a two-hour drive from Toronto, was CA$749,000 in February, up 84% in two years. In Barrie, north of the country’s largest city, a typical home is now CA$940,000, according to data from the Canadian Real Estate Association. 

Nationally, home prices posted a record monthly surge in February as buyers piled into the market ahead of interest rate increases by the Bank of Canada. Benchmark home prices rose 3.5% last month from January, according to CREA data. 

Foreign citizens can apply for a rebate from the Ontario tax if they become permanent residents of Canada within four years of paying it. But rebates will no longer be given to international students or to foreign nationals who are temporarily working in the province. The tax has brought in about CA$600 million in revenue since first implemented in 2017, though some of that may be given back, a government spokesperson said. 

“There is no silver bullet to solving the housing crisis,” Housing Minister Steve Clark said in a statement. “Addressing the housing supply crisis is a long-term strategy that requires long-term commitment and coordination with our partners and between all levels of government.” The provincial government said it would work with local governments to implement other measures, including taxes on vacant homes. 

Copyright Bloomberg News

Sam Ansari

Mortgage Boker

Centum Liberty Mortgages Corp.

7191 Yonge Street, Suite 505

Thornhill ON L3T0C4

Innovation

March 30, 2022

Sam Ansari 0 Comment
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Also, Analysts: BoC must show restraint in its rate hikes.

Too many increases too soon could harm the Canadian financial system in the long run, observers warn.

While the Bank of Canada’s rate hikes are more than justified by the current macroeconomic climate, policymakers should take care not to fall into the other extreme and introduce too many increases in too short of a period of time, according to market observers. Among those calling for restraint is Ed Devlin, founder and managing partner of Devlin Capital, who said that the best step that the central bank can take at the moment is to approach its rate hikes in a circumspect manner. “The market is now pricing an actual tightening, even though we’re still emerging from a pandemic, and we’re dealing with the outbreak of war in Europe. For me, this starts to smell like an overshoot,” Devlin said. “I think you want to take every day’s price action with a bit of a grain of salt … we could roll out of bed tomorrow and there’s been an offensive somewhere in Ukraine, and we’re back to where we started.” Sam Ansari, Mortgage Broker, Centum Liberty Mortgages Corp, 7191 Yonge Street, Suite 505, Thornhill ON L3T0C4.

Increased profits

Interest rates are rising. Is it time to switch to a fixed rate mortgage?

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For the first time since 2018, the Bank of Canada has hiked the overnight interest rate to curb inflation and cool the real-estate market. With increasing interest rates many variable mortgage holders are considering switching to a fixed rate mortgage.

History has shown that central banks usually fall short of their rate hike goals. Variable rates offer more flexibility and lower penalties than fixed rate mortgages. Many borrowers end up breaking their term if they need to re-finance or sell.

The penalty for breaking a variable mortgage is typically three months of interest whereas a more punitive calculation is usually used with a fixed rate.

The main reason for switching to a fixed rate is if you experience anxiety every time the Bank of Canada makes an interest rate announcement. For a five-year fixed rate, 3.3 per cent is still historically low and below current levels of inflation, so if you prefer the peace of mind — the fixed option makes sense.

Economics

CMHC launches latest multi-unit insurance offering

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Canada Mortgage and Housing Corporation has announced the launch of its latest multi-unit mortgage loan insurance product, MLI SELECT.

This new product is designed to incentivize the preservation and creation of rental supply, as well as address the need for affordable and accessible housing that adheres to climate-conscious engineering principles.

The incentives will be available for both new projects and existing properties, CMHC added.

“As Canada’s only provider of multi-unit mortgage insurance for residential properties, we believe that MLI SELECT will be a critical component to achieving better housing outcomes for renter households,” said Romy Bowers, president and CEO of CMHC. “Increasing rental supply and preserving existing rental stock will offer more affordable options for renters, including those in core housing need, getting us closer to our aspiration of, by 2030, everyone in Canada has a home they can afford and that meets their needs.”