Roller Coaster for First Time Buyers
Royal Bank hikes rates day after province offers tax refund
First time Buyers in Toronto’s hot property market mush be wondering when they will catch a break.
A second major bank announced Tuesday it was raising its mortgage rates – a day after the province introduced a tax refund designed to help first timers step on to the property ladder.
Although the two events are unrelated & mortgage rates remain extremely low overall, housing experts agree the economic environment is stressful for house hunters.
The Royal Bank said Tuesday it’s raising its special offer for a five year fixed rate mortgage to 2.94%, an increase of 30 basis points. Effective Thursday, the lender is also raising its rates on some other mortgages. RBC’s announcement comes about two weeks after TD raised its mortgage prime rate to 2.85% from 2.7%.
The Royal Bank increase is tied to turmoil in the bond markets following the U.S. election. It’s not clear if the bond market has bottomed out or if rates will come back down, said mortgage agent Jason Friesen of Verico Premiere Mortgage Centre.
It’s going to be a bit touch-and-go. Even economists could not have seen any of this run-up on bonds until after November 8th when Trump was announced the winner, he said.
Meanwhile, the provincial plan to double the refund on the land transfer tax – from $2000 to $4000 on the price of a home over $368,000 – was designed to make buying more affordable.
It is expected to make the most difference outside the super heated Toronto area market.
But even in Toronto, the only Ontario city with a municipal land transfer tax, the relief will be helpful for first-time Buyers scratching together a down payment under the federal government’s more stringent mortgage qualification rules.
On a Toronto home priced at $800,000, the land transfer tax – provincial & city combined – would come down from $24,200 for a first time Buyer to $16,475.
But that Buyer would also need a bigger down payment. Instead of coming up with a minimum 5% down, the consumer would have to put 5% on the first $500,000 * 10% down on anything above that.
5% on an $800,000 place would have been $40,000, but under the tougher new mortgage rules, the minimum down payment would be $55,000.
So any additional money saved with the land transfer taxes can help make it that much easier to qualify.
Source: MetroNews – Business-Mortgage – November 16, 2016
By The Numbers
2.4% - Rise in national home sales from September to October
1.7% - Increase in homes newly listed for sale from September to October
10.9% - Toronto region home sales increase in October year-over-year
-37.9% - Greater Vancouver year-over-year home sales in October
Source: Canadian Real Estate Association
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