TD Economics brought to you by Dina Ignjatovic, Economist
Data Release: Housing starts kick off the year on strong footing
- Canadian housing starts kicked off the year on a strong note, with homebuilders breaking ground on 207k units (annualized) in January. This extends December's sharp gain, and pushes the 6-month moving average up just shy of the 200k unit mark.
- The strength in January stemmed from the multi-family sector, which was up 4.2% following a 14% gain in December. Meanwhile, single family construction was down 4.6% on the month, reversing some of December's gains.
- Regionally, Ontario remained the key driver of growth, with starts up by a whopping 25% in January. Homebuilding in the Atlantic Provinces was also up during the month while the remaining regions recorded declines. B.C. experienced the largest pullback, as home starts slid 33% from the month prior.
Key Implications
- Overall, housing starts have been hovering around the 200k mark annualized (on a trend basis) for the last six quarters, or just slightly above the current rate of household formation. However, homebuilding construction should begin to slow over the course of the year, consistent with a cooling in overall housing market activity.
- Still, the recent strength in multi-unit projects could have further room to run given the surge in building permit approvals seen over the second half of last year. This could be partly offset by single-family construction, which is already at relatively lofty levels.
- The regional story will continue to reverberate across the housing markets, with central Canada leading the way, while B.C. and the oil-rich provinces lagging behind.
Mortgage Penalties - What you need to know
February 29 2016 Posted by Jennifer Gaudet
What you need to know about Mortgage Penalties
When you go to your bank to get pre-approved for mortgage financing does your banker talk about Mortgage Penalties? This should be the first topic you speak about pertaining to the mortgage even before the Interest Rate. Many banks grab you with the Interest Rate and fail to mention what lays within the mortgage. Mortgage terms and pre-payment penalties should be discussed at the time of pre-approval.
Why would I have a mortgage pre-payment penalty?
A mortgage pre-payment penalty occurs when you break your mortgage term for any reason. You do have the option to Port your mortgage to a new home but only with a certain timeframe such as 30 to 60 days after the sale of your home. This will only be useful if you are purchasing a home after selling your current home. If you are not purchasing then you are subject to penalties. You may think that you can just break your mortgage to get a better term or to refinance to consolidate debt or do renovations to your home. If you are in a closed fixed rate or variable closed mortgage you will always have a penalty. Some lenders have special allowances for Canadian Military Members if they are posted because of employment.
There are two different kinds of mortgage pre-payment penalties
The 2 different kinds of penalties are IRD - Interest Rate Differential or a 3 month Interest Penalty. All Major Canadian Banks charge the IRD or 3 months Interest Penalty whichever is larger. Most of the time this works out to be the Interest Rate Differential Penalty. The IRD penalty is calculated using the amount of time remaining in your mortgage term and the difference between the posted bank rate (which is usually between 4 - 5%) and the rate you currently have on your mortgage. This creates a very large Mortgage Penalty.
For example. Your mortgage is $200,000 and let’s say you have a 25 year amortization mortgage and you are in a 5 year fixed term with an interest rate of 2.99%. You want to break your mortgage but have 2 years remaining on your mortgage. You will have a penalty which will turn out to be an IRD penalty of approx. $7800.00. You would have to be within the last 6 months of your mortgage term to have the lesser which would be the 3 months interest penalty of approx. $1695.00. This is why it is very important to insure you have the correct mortgage and are protected on the back end. It is just as important as your low rate.
Are all Lenders Equal when it comes to mortgage penalty IRD Calculations?
No they are not the same. Mortgage Lenders that Mortgage Brokers can access have the lowest rates and have excellent pre-payment penalty mortgages. Lenders such as Merix, First National, MCAP, and Manulife all calculate their IRD penalties with the banks special rate which almost always ends up being equivalent to a 3 month interest penalty. Ask me how I can help you with getting a mortgage with one of these lenders that will align with your financial goals. Life happens and you never know what the future holds. An illness, a move, or financial difficulties - protect your two biggest assets, your home and your credit!
Jennifer Gaudet
Associate Mortgage Broker - Military Mortgage Specialist
- 902-824-2906
- jennifer@jennifergaudet.ca
- Licence # 2024-3000814
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