Homes under construction in an Ottawa suburb on Oct. 15, 2021.Adrian Wyld/The Canadian Press
The state of Canadian housing affordability has long been an acute issue, but government policy attempts to ease the pressure haven’t always made good sense.
That’s why we were pleasantly surprised to see the federal government roll out targeted measures that actually prioritize first-time home buyers, without actively stoking speculative market activity and home price inflation.
The new prebudget teasers announced Thursday by Finance Minister Chrystia Freeland include expanding the withdrawal limit for the RRSP Home Buyers’ Plan (HBP) to $60,000, extending the commencement of its repayment to five years and strengthening language in the mortgage charter for distressed borrowers.
However, it’s the reintroduction of 30-year amortizations for insured first-time home buyers purchasing new builds that’s really making waves. (Insured borrowers are those who pay less than 20 per cent in their home’s down payment. They have been restricted to a 25-year mortgage repayment timeline since 2012, when a number of restrictions were introduced.)
Unlike previous complex and illogical policies – such as the ill-fated First Time Home Buyers’ Incentive – this proposal is looking good on paper. Not only will it provide greater financial flexibility for qualifying borrowers, but it’s also a clear attempt to boost demand for new build supply.
In large urban centres such as the Greater Toronto and Vancouver areas – where new freehold builds well exceed the million-dollar mark – this means condos, but it could apply to new houses in other parts of the country.
Let’s take a look at how a 30-year amortization could impact qualification for a theoretical high-ratio insured borrower, with an income of $80,000 and a down payment of 10-per-cent saved.
Assuming this borrower qualifies for today’s lowest available five-year fixed rate of 4.79 per cent (and passes the accompanying 6.79-per-cent stress-test threshold), they’d be able to purchase a home priced at $342,000 – if amortizing their mortgage over 25 years.
Now let’s stretch that amortization by five years. Doing so would mean the borrower now qualifies for a maximum home purchase price of $364,600 – an extra $22,600, or 6.6 per cent, more.
This is coupled with the fact that first-time buyers now have the most powerful tax-efficient financial vehicles ever to save up their down payments – two buyers could now feasibly save their entire down payment using a combination of the HBP and First Home Savings Account.
However, a glaring question remains: It’s currently unclear how the deposit structure will work for these deals. As new construction builders require up to a 20-per-cent deposit (separate from the down payment) from a buyer before they’ll start building, how would a borrower be able to participate while still being considered high-ratio, and therefore, insured? Will this need to be paired with additional government support to be feasible?
For example, in the case of a purchaser with 10-per-cent down, could the builder turn to the government to float the remaining 10 per cent, knowing that when the deal closes, the new mortgage will then supplant that deposit support?
Some additional questions we’re curious to see answered as this is rolled out:
● There will be an additional mortgage insurance premium for these mortgages – how much will it be?
● Will this new policy apply to assignment sales?
● Will this drive real estate decisions for new builds?
In all, though, it’s a good start. And while the mortgage industry would be heartened to see longer amortizations available to all first-time buyers, regardless of their home purchase type, such helpful improvements – that may actually get buyers into the market – are welcome.
James Laird is the co-founder of Ratehub.ca and president of CanWise Financial mortgage lender. Penelope Graham is the director of content at Ratehub.ca.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
