Both of the main candidates in British Columbia’s election campaign pushed their own plans to solve parts of the housing crisis.

By Nono Shen and Brieanna Charlebois

B.C. Conservative Leader John Rustad told a news conference in Surrey that his government would end the multi-year permit delays and would get homes built at the speed and scale needed to address the housing crisis.

NDP Leader David Eby went to Cumberland on Vancouver Island to promote his party’s plan to fast-track factory-built homes.

Eby said pre-built homes would cut waste, reduce emissions, and advances in the industry mean the homes are “beautiful and high-quality.”

He said the process was “more like Lego” than normal construction.

“The idea is pretty straightforward. In a controlled factory environment, you can build faster, you can build with less waste and the homes that are built are more consistent and more efficient and it’s cheaper.”

Rustad said the Conservative Party of B.C. would redesign the approval process for home building, setting a six-month limit for rezoning and development permit and three months for a building permit.

“This means that we will significantly be able to improve the time frame it takes to actually get construction happening in this province, and we’ll be working with city halls across the province to be able to meet these timelines,” Rustad said.

If a clear yes or no isn’t issued by a city within that limit, the province would issue the permit, said a B.C. Conservative news release announcing the platform.

Rustad said the party would remove NDP taxes on housing, support transit-oriented communities, reform development cost charges and make taxes fair for homeowners.

“We have so much regulation that has been put in place associated with housing that it makes it really difficult for anybody to be able to actually get through and build things, not to mention the cost,” he said. “So we’ll amend the Local Government Act to prevent any home killing red tape that has been introduced by this government.”

The party’s statement also outlined their zoning plan, adding that it would work with BC Assessment “to make sure that current homeowners don’t get hit with higher tax bills based on future potential.”

The party statement said, if elected, a Conservative government would build new towns, saying B.C. is blessed with an abundance of land, but the NDP refuses to use it to end the housing shortage.

“We will identify land outside the Agricultural Land Reserve that has the potential to support beautiful new communities.”

A statement issued by the NDP on Friday said it would work with industry, municipalities and First Nations to create a provincewide framework for prefabricated homes so builders know what’s required in every community.

It said there would be a pre-approved set of designs to reduce the permitting process, and it would work to develop skills training needed to support prefabricated home construction.

The statement said Scandinavian countries had embraced factory-built homes, which “offer an alternative to the much slower, more costly process of building on-site.”

“By growing B.C.’s own factory-built home construction industry, everyone from multi-generational families to municipalities will be able to quickly build single homes, duplexes and triplexes on land they already own,” Eby said.

The party said legislation passed by the NDP government last year was a “game changer” for the factory-built home construction industry in the province, where there are currently 10 certified manufacturing plants.

Muchalat Construction Ltd. is one of them, and owner Tania Formosa said pre-approved structures speed up the building process considerably.

She said her company’s projects currently take 12 to 13 months to complete, from startup design to getting the house on site.

“If everything was in place and fast-tracked at the beginning and we were able to just fly along, it would probably take three months off the full schedule,” she said.

She said a main issue for modular manufacturers is that work gets stalled if they run into roadblocks with jurisdictions or BC Housing in the approval process.

“There’s no option for the manufacturer to start another project,” she said. “Having our products approved prior to the process would be amazing.”

She acknowledged the potential drawback of pre-approved designs creating a cookie-cutter look for some neighbourhoods.

“Unfortunately (what) happens in your jurisdiction, in your city, is it ends up looking a lot the same, but what are your priorities?”

This report by The Canadian Press was first published Sept. 27, 2024.

OSFI has confirmed that it will remove the requirement for lenders to apply the Minimum Qualifying Rate (MQR) to straight switches of uninsured mortgages.

This article was written for Canadian Mortgage Trends by:

Economists anticipate that Canada’s annual inflation rate in August fell to its lowest level since March 2021.

By Sammy Hudes

“Unless there’s something lurking out there that we’re not aware of, it looks like we’re headed for a pretty favourable reading,” said BMO chief economist Douglas Porter.

RBC economists Nathan Janzen and Claire Fan said in a report last week that those expectations would put the headline inflation rate just a hair over the Bank of Canada’s two per cent inflation target.

“Most of that August slowing is expected from a pullback in gasoline prices, but the (Bank of Canada’s) preferred core CPI measures are also expected to trend lower, with the closely-watched three-month annualized growth rate easing from an average of 2.6% in July,” the RBC economists said.

The continued progress on slowing inflation comes as the central bank has signalled a willingness to speed up cuts to its key lending rate if circumstances warrant.

The Bank of Canada reduced its key lending rate by a quarter-percentage point earlier this month — the third consecutive cut — to 4.25%. Governor Tiff Macklem said the decision was motivated by falling inflation, noting if the CPI moving forward “was significantly weaker than we expected … it could be appropriate to take a bigger step, something bigger than 25 basis points.”

On the other hand, Macklem said if inflation is stronger than expected, the bank could slow the pace of rate cuts.

Inflation has remained below three per cent since January and fears of price growth reaccelerating have diminished as the economy has weakened.

Porter said despite progress on the inflation rate, it’s still “not in a place where it’s a compelling argument that the bank has to go even faster.”

He forecasts the central bank will cut its key lending rate by a quarter-percentage point at every meeting until July 2025, bringing it down to 2.5 per cent by that time. That prediction also comes after data released last week that showed Canada’s unemployment rate rose to 6.6% in August from 6.4% in July.

However, Porter said it’s possible the bank could speed up its rate cutting cycle if inflation continues easing.

“If we’re going to be wrong, it’s that we’re going to get to 2.5% even more quickly and possibly lower than that,” said Porter.

“There is a case to be made that if the economy were to weaken further, there’s little reason for the bank to keep rates in what they consider to be the neutral zone. They could go below that.”

Shelter costs have remained the main driver of inflation as Canadians face high rents and mortgage payments. Porter noted that when factoring out housing costs, inflation in both Canada and U.S. is hovering slightly above one per cent.

“So really, the only thing keeping Canadian inflation above two per cent is shelter and it does look like shelter costs are probably going to fade,” he said.

“It looks as if rents are starting to moderate. They’re not necessarily falling, but not rising as quickly. And of course with interest rates coming down, ultimately the big kahuna here, mortgage interest costs, will recede as well.”

With the U.S. Federal Reserve set to meet on Wednesday, Janzen and Fan said they expect the American central bank to announce its first rate cut in four years.

“Gradual but persistent labour market softening and slowing inflation make it clear that current high interest rates are no longer needed,” they wrote.

“We think governor (Jerome) Powell’s comments will likely stay on the cautious side — hinting at future rate cuts without committing to a pre-determined path to allow for more flexibility in future decisions.”

—With files from Nojoud Al Mallees in Ottawa

This report by The Canadian Press was first published Sept. 15, 2024.

By Craig Wong

The decision by the Bank of Canada to cut its key interest rate target this week was good news for borrowers with variable-rate mortgages, bringing back some of the shine for the once popular loans.

The rate cut prompted big commercial banks to lower their prime rates, which are used to set the rates charged for variable-rate mortgages.

Toma Sojonky, a mortgage broker at Verico Paragon Mortgage Group in West Vancouver, B.C., says variable-rate mortgages are beginning to regain some traction with clients after falling out of favour when the rate-hiking cycle began.

“I think there are folks who understand that the pendulum is swinging the other way,” he said.

Those with a variable-rate mortgage have had a wild ride since the start of the pandemic.

When the Bank of Canada cut interest rates to nearly zero in the spring of 2020, those with variable-rate mortgages saw the rates charged on their loans fall too, helping fuel their popularity.

But the reverse was also true. When the central bank started rapidly raising rates in 2022 in an effort to bring inflation under control, those with variable-rate loans saw their costs march higher in lockstep. The increase in rates meant either higher payments or less principal being repaid on the loans.

Borrowers who saw the interest rates charged on their loans more than double saw their monthly payments increase by hundreds of dollars or the amortization period of their loans extended by years.

The popularity of variable-rate loans plunged.

But the economy has shifted once more and the central bank has cut interest rates three times this year so far and suggested more cuts were coming.

In announcing the rate cut Wednesday, Bank of Canada governor Tiff Macklem said if inflation continues to ease broadly in line with the bank’s July forecast, it is reasonable to expect further cuts in the policy rate.

Julie Leduc, a mortgage broker at Mortgage Brokers Ottawa, said clients with variable-rate loans were not happy when rates were rising, but the cycle is turning.

“We’ve lived the worst of it, we’re on our way out,” she said.

“So let’s look for the benefits and the benefit is, if they go variable and the rates go down, they’re going to live the benefit.”

Right now, the rates offered to those looking for a new variable-rate mortgage or needing to renew are higher than those being offered for five-year fixed rate mortgages, something that Leduc called an anomaly.

That’s because the expectations are that the Bank of Canada will continue to cut interest rates, lowering the amount charged to borrowers in the future. If something unexpected happens and the central bank doesn’t cut rates, then the rates charged on variable-rate mortgages won’t go down.

But if things continue to roll out as expected, those choosing variable-rate loans will see the amount they are charged go down. Just how much and how quickly will depend on the central bank.

Sojonky says the discounts lenders offer to the prime rate for variable-rate mortgages are also improving.

“Previously in the winter or last fall, we saw discounts to prime as low as 0.15 to 0.3, whereas now we are beginning to enjoy discounts to prime that are approaching one per cent again,” he said.

Leduc says variable-rate mortgages also have the advantage of being less costly to break than their fixed-rate counterparts if you need to get out of one before the term is up.

The penalty for variable-rate loans is typically three months of interest, while a fixed rate closed mortgage penalty is typically the greater of three months of interest or what is called the interest rate differential amount, which is often much greater.

Leduc says none of her clients expect to break their mortgages before the end of their term but in reality, about half of them end up doing so.

This report by The Canadian Press was first published Sept. 5, 2024.

This article was published on Canadian Mortgage Trends.

Despite rising affordability challenges, the majority of young Canadians still view homeownership as a valuable investment, according to a recent Royal LePage survey.

A full 84% of Canadians aged 18 to 34 said homeownership is a worthwhile investment, with even higher percentages in Saskatchewan and Manitoba (94%) and Atlantic Canada (93%).

Of those who don’t currently own a home, 74% said purchasing a home is a priority for them.

“It is not surprising that young buyer hopefuls see immense benefits in home ownership,” said Royal LePage CEO Phil Soper.

However, with high home prices and elevated interest rates, many feel it is increasingly out of reach. Just 54% of those who prioritize homeownership said they believe it’s an achievable goal, with another 26% saying they’re unsure.

“The youngest cohort of homebuyers in Canada have no shortage of barriers on their path to ownership,” Soper added. “Though the cost of borrowing has begun to come down, chronic supply shortages have kept housing prices from dropping, even as demand softened under the weight of high interest rates.”

The survey highlights that 60% of young Canadians who don’t currently own a home plan to purchase one within the next five years. However, financial barriers remain a significant hurdle, with nearly two-thirds citing down payments as the biggest obstacle to homeownership. Despite these challenges, many young Canadians are willing to make sacrifices, such as relocating to more affordable areas or reducing non-essential spending, to achieve their goal of owning a home.

Interestingly, the desire for homeownership among young Canadians is driven by a strong belief in the long-term financial benefits of owning property. Nearly three-quarters of respondents view homeownership as a solid investment, particularly as a means of building wealth over time. This perspective aligns with the broader Canadian belief that real estate is a secure and appreciating asset, even amid market fluctuations.

However, the report also points out the growing frustration among young buyers, many of whom feel priced out of their desired markets. This has led to increased interest in alternative living arrangements, such as co-ownership or purchasing smaller properties. Some young Canadians are also delaying their homebuying plans in hopes that market conditions will eventually improve.

This article was written for Canadian Mortgage Trends by: