What’s Next for your Home After a Separation?

Mortgage Tips Kim Stenberg 28 Oct

Growing up, most people dream about living a fairytale with a wonderful partner and a life of bliss. Unfortunately, real life is not always a fairytale and not every relationship lasts forever. In fact, latest statistics show that 38 percent of all marriages in Canada end in divorce.

Separating, whether through divorce or ending a common law relationship, is never an easy step. Losing someone close to you (whether for the better or not) is hard – but it doesn’t have to mean losing your home too. Most individuals who are going through a separation feel as though they are forced to sell their home and split the equity depending on your agreement, but there is another way.

spousal buy-outs

Spousal buy-outs are one of the mortgage industries best kept secrets and we want to blow the lid on this great alternative! While not everyone will want to remain in their home, many individuals may opt to remain rooted – especially for those with children who are already enrolled in school and happy in their neighborhood. This is where the Spousal Buy-Out Program comes in.

Backed by all three of Canada’s mortgage insurance providers (Canada Mortgage and Housing Corporation, Sagen™ and Canada Guaranty), this program is designed to allow one party to refinance the shared home up to 95% of its appraised value. In order to qualify, both you and your ex-partner must currently be on the deed to the property. As a one-time opportunity, the Spousal Buy-Out Program can also be used to pay off other debts outside the separation agreement, further assisting with the transition.

Now you may be thinking “I wish I could, but I can’t afford it”. Well, don’t sell yourself short just yet! We understand the cost of purchasing a home, whether outright or from your partner, can be high. Fortunately, The Spousal Buy-Out Program was designed to help YOU and mitigates these costs by allowing individuals to bring on a cosigner, such an existing family member or even a new partner, to assist.

If you are separating from your spouse or partner and would really like to hold onto your shared home, there are a few things you will need including:

1. AN APPRAISAL

An appraisal report will likely have been obtained to determine Equalization of Assets. However, in some cases the appraisal may not be acceptable to a lender unless it was originally ordered by a third party. The appraisal must also have been produced within 90 days (less with some lenders) to ensure accuracy. If the original report was previous to 90 days, a new one must be obtained (talk to your mortgage broker first).

2. A SIGNED SEPARATION AGREEMENT

To qualify the lender must be provided a signed copy of the separation agreement. The details of asset allocation must be clearly outlined.

3. AN AGREEMENT OF PURCHASE AND SALE

A standard agreement of sale indicating the new ownership.

4. AN EMPLOYMENT LETTER OR RECENT PAY STUB

This is required so the lender can verify your ability to manage your mortgage payments.

5. DEBT PAYOUT LIST

This is an optional one-time option for paying off additional debts outside of the separation agreement. The proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly noted in the signed separation agreement.

Moving on in life can often be difficult, but this program allows you to maintain some of your routine and security by ensuring you – and your children – can remain in the home you love.

BANK OF CANADA RATE ANNOUNCEMENT: Hawkish Decision

Latest News Kim Stenberg 27 Oct

Bank of Canada Responds to Mounting Inflation: Ends QE and Hastens Timing of Rate Hike

The Bank of Canada surprised markets today with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:

  • The Canadian economy has accelerated robustly in the second half.
  • Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can’t find appropriate workers quickly enough to meet demand.
  • Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
  • The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
  • Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
  • The Bank views the risks around this inflation outlook as roughly balanced.

In response to the Bank’s revised view, it announced that it is ending quantitative easing, shifting to the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. The Bank now owns about 45% of all outstanding GoC bonds.

The Bank today held its target for the overnight rate at the effective lower bound of 1/4 percent. While this was widely expected, the Bank adjusted its forward guidance. It moved up its guidance for the first hike in the overnight rate target by three months, from the second half of 2022 to the middle quarters–sometime between April and September 2022.

Canadian bond traders had already bet a rate hike would occur in Q1 or Q2. Nevertheless, bond yields spiked at 10 AM today when the Bank released its policy decision (see chart below).

Bottom Line

Since the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.

The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank’s 1%-to-3% target band until late next year.

There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.

Concerning housing, the MPR says the following: “Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth”.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

How do I know if I have Homeowner’s Title Insurance?

Mortgage Tips Kim Stenberg 27 Oct

Title insurance can cover potentially massive losses and completely turn around what would otherwise have been an awful situation. When unexpected issues come up, it’s important to make sure you’re protected—you might not have the policy you think you do.

There are two types of title insurance policies: lender policies and owner policies. The common confusion comes from the fact that they both often just go by “title insurance” in conversation. Their premiums have the same structure of a low one-time fee, and they offer slightly different coverage. But the main difference lies in who the policy protects, the lender or the owner—you.

Lender policies or loan policies have a shorter expected shelf life than homeowner policies. They’re tied to the loan itself, so if you refinance the mortgage with a different financial institution, you’ll need to factor in the cost of a new policy. Most lenders will require you to get a lender policy as a condition of securing your mortgage from them, and it does provide you with some benefits, like a faster, more affordable closing and some fraud protection. But the fact that so many lenders require it often leads to confusion for homeowners down the road.

If you consult the closing documents from your home purchase and see a title insurance item, it would be easy to think you’re fully covered. But you need to check that you have an owner’s policy as part of your closing documents as well, not just a loan policy. Even if you notice this issue long after closing, it still might not be too late to get yourself covered. As long as you get it before you learn of any title defects or other covered risks, an existing homeowner’s policy can help you get the level of coverage you need.

Note: a homeowner’s policy can protect you against certain known title defects on a case-by-case basis. You should consult your lawyer or notary to see if your known title defect can still benefit from coverage.

Homeowner’s title insurance policy: more protection for you and your title

A homeowner’s title insurance policy protects you and any heirs who might inherit your property. Owners may have one without even knowing it. When a friend, colleague or your legal advisor talks about title insurance, this is almost always the policy type they mean. Because you only pay the policy premium once—at a time when you’re tracking all the other moving parts of closing on your home—if you have a homeowner’s title insurance policy, it’s easy to forget. There’s no monthly premium to remind you of the policy, and it might be years from the purchase of your home before you need to make a claim.

Make sure you’re informed: Check that you have the protection you need!

It’s always a good idea to make sure you’ve verified your coverage. Here are three easy steps to know where you stand:

  1. Check your real estate closing documents from your lawyer or notary. Remember to verify the policy type, even if you see title insurance in the closing documents—it could just be the lender policy.
  2. Ask your real estate lawyer or notary. They would have been the one to actually order your homeowner policy if you got it at purchase, so they can find out directly from the insurance provider for you.
  3. Call us. If you are a policyholder, we’ll have your policy on file and will be able to send you a copy. Please call our customer service line at 1.877.888.1153 Monday to Friday between 8:00 a.m. and 8:00 p.m. EST.

If you find out you don’t have title insurance yet, it’s time to get more protection with an FCT existing homeowner policy.

Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.

What is Alternative Lending?

General Kim Stenberg 26 Oct

When it comes down to getting approved for a mortgage, there are a lot of factors and not everyone will qualify.

So what are your options if the banks say “no”?

When conventional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative! That’s where alternative lenders come in.

what is an alternative lender?

While the big banks, monolines and credit unions – or “A lenders” as they are sometimes referred – are viewed as the gold standard in the mortgage industry, some people have no choice but to consider other options for financing.

If you’re seeking a mortgage, but your credit score is damaged in some way and big institutions won’t lend you the money, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space.

Much like the A Lender space, there are various companies which operate in the B lending space. Some B lenders are known as Mortgage Investment Companies (or MICs). Like the big banks, they’re still regulated, have shareholders and a board of directors and essentially act like a typical company. Equitable Bank and Home Capital are examples of other institutions that offer alternative options.

Alternative lenders cater to individuals which lack a strong credit history, or a guaranteed income (recent immigrants, or the self employed, for instance). As a result, these lenders generally have lower entry qualifications, which are offset by higher interest rates.

WHY IS ALTERNATIVE LENDING NECESSARY?

  • CRA arrears
  • Income issues such as non-traditional income as with self-employed borrowers
  • Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies
  • Unexpected liens on title
  • Foreclosure situations
  • Unique financing needs/opportunities

private or unregulated lenders

Beyond B-lenders are another alternative, which are known as Private or Unregulated lenders. These could just be individuals with money who are looking to invest. They are not regulated by any agency, and their rates and fees could be quite high.

These lenders are not required to stress test mortgage applicants, but many will abide by lower qualification rates. As a result, getting approved for a loan through an alternative or uninsured lender can be much easier than going through a traditional bank or credit union.

However, the same with B Lenders, it is vital to pay close attention to the deal an unregulated lender offers. Lower qualification rates tend to come with baggage in the form of high interest rates or penalties.

plan b mortgage services

Cole Hennig, president of Plan B Mortgage Services, explained his company typically deals with clients who are self-employed, have damaged credit and a score somewhere below 650. Some have difficulties proving their income. They could be looking for a second mortgage or seeking a way to keep their current home. He also noted that his clients often experienced a “trigger event”, such as a job loss or work-place injury, which forced them to take on more debt than they and can’t manage.

The point of using an alternative lender, according to Hennig, is to get back into the good books of a conventional lender. Plan B will work with their clients, offering a full assessment of their situation, and provide tools to repair their credit. However, Hennig added it’s critical his clients have a path to getting out of the B lending space.

“Usually, we’re seeing people who have hit a rough spot, and our job here is to get them an immediate solution,” he said. “But, if it doesn’t lead anywhere, it’s no good to us. We’re not going to do a deal if we don’t see how it’s going to help them get back to the best place they can be.”

At that point, Hennig said a difficult conversation with the client needs to be had, which could include advising them to sell the home to avoid foreclosure.

considerations for alternative mortgages

Due to the “B” Lender space, it is important to take a good look at the conditions for these mortgage products to ensure that you won’t get trapped with rates you can’t afford.

Before considering an alternative mortgage, there are a few things you should ask yourself:

  1. What issue is keeping me from qualifying for a mortgage today?
  2. How long will it take me to correct this issue and qualify for a mortgage?
  3. How much do I currently have available as a down payment?
  4. Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?

If you are someone who is ready to go ahead with an alternative mortgage due to heavy credit score damage, or you don’t want to wait until you’re able to qualify with a traditional lender, these are five questions you should ask when reviewing any alternative mortgage product:

  1. How high is the interest rate?
  2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
  3. Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
  4. What is the cost of each monthly mortgage payment?
  5. What is the fine print?

When it comes to the alternative lending space, things can get a bit murky. Seeking the help of a mortgage broker will ensure that you are making the best decision for you! A qualified broker can help you source out various alternative mortgage products and will review the rates and terms to ensure it is the best fit.

 

Published by DLC Marketing Team

Canadian Inflation Rises Once Again

Latest News Kim Stenberg 20 Oct

Prices are Rising Everywhere – Transitory Can Last a Long Time

Today’s release of the September Consumer Price Index (CPI) for Canada showed year-over-year (y/y) inflation rising from 4.1% in August to 4.4%, its highest level since February 2003. Excluding gasoline, the CPI rose 3.5% y/y last month.

The monthly CPI rose 0.2% in September, at the same pace as in the prior month. Month-over-month CPI growth has been positive for nine consecutive months.

Today’s inflation is a global phenomenon–prices are rising everywhere, primarily due to the interplay between global supply disruptions and extreme weather conditions. Inflation in the US is the highest in the G7 (see chart below). The economy there rebounded earlier than elsewhere in the wake of easier Covid restrictions and more significant markups.

Central banks generally agree that the surge in inflation above the 2% target levels is transitory, but all now recognize that transitory can last a long time. Bank of Canada Governor Tiff Macklem acknowledged that supply chain disruptions are “dragging on” and said last week high inflation readings could “take a little longer to come back down.”

 

Prices rose y/y in every major category in September, with transportation prices (+9.1%) contributing the most to the all-items increase. Higher shelter (+4.8%) and food prices (+3.9%) also contributed to the growth in the all-items CPI for September.

Prices at the gas pump rose 32.8% compared with September last year. The contributors to the year-over-year gain include lower price levels in 2020 and reduced crude output by major oil-producing countries compared with pre-pandemic levels.

Gasoline prices fell 0.1% month over month in September, as uncertainty about global oil demand continued following the spread of the COVID-19 Delta variant (see charts below).

 

Bottom Line

Today’s CPI release was the last significant economic indicator before the Bank of Canada meeting next Wednesday, October 27. While no one expects the Bank of Canada to hike overnight rates next week, market-driven interest rates are up sharply (see charts below). Fixed mortgage rates are edging higher with the rise in 5-year Government of Canada bond yields. The right-hand chart below shows the yield curve today compared to one year ago. The curve is hinged at the steady 25 basis point overnight rate set by the BoC, but the chart shows that the yield curve has steepened sharply with the rise in market-determined longer-term interest rates.

Moreover, several market pundits on Bay Street call for the Bank of Canada to hike the overnight rate sooner than the Bank’s guidance suggests–the second half of next year. Traders are now betting that the Bank will begin to hike rates early next year. The overnight swaps market is currently pricing in three hikes in Canada by the end of 2022, which would bring the policy rate to 1.0%. Remember, they can be wrong. Given the global nature of the inflation pressures, it’s hard to imagine what tighter monetary policy in Canada could do to reduce these price pressures. The only thing it would accomplish is to slow economic activity in Canada vis-a-vis the rest of the world, particularly if the US Federal Reserve sticks to its plan to wait until 2023 to start hiking rates.

It is expected that the Bank will taper its bond-buying program once again to $1 billion, from the current pace of $2 billion.

The Bank will release its economic forecast next week in the Monetary Policy Report. It will need to raise Q3 inflation to 4.1% from its prior forecast of 3.9%.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

 

Canadian Home Sales Rise in September for the First Time Since March

Latest News Kim Stenberg 15 Oct

Today the Canadian Real Estate Association (CREA) released statistics showing national existing-home sales rose 0.9% between August and September 2021, posting the first monthly gain since March (see chart below). On a year-over-year (y-o-y) basis, the number of transactions last month was down 17.5%. Nevertheless, it was still the second-highest sales figure ever for the month of September.

“September provided another month’s worth of evidence from all across Canada that housing market conditions are stabilizing near current levels,” said Cliff Stevenson, Chair of CREA. “In some ways that comes as a relief given the volatility of the last year-and-a-half, but the issue is that demand/supply conditions are stabilizing in a place that very few people are happy about. There is still a lot of demand chasing an increasingly scarce number of listings, so this market remains very challenging.”

Housing supply remains a major constraint, forcing many buyers to either pay up for scarce properties or to remain on the sidelines. This is particularly troublesome for first-time homebuyers as mortgage rates are coming under renewed upward pressure as inflation concerns have forced yield curves to steepen and longer-term bond yields to rise worldwide.

New Listings

Exacerbating supply problems, the number of newly listed homes fell by 1.6% in September compared to August, as gains in parts of Quebec were swamped by declines in the Lower Mainland, in and around the GTA and in Calgary.

With sales up and new listings down in September, the sales-to-new listings ratio tightened to 75.1% compared to 73.2% in August. The long-term average for the national sales-to-new listings ratio is 54.8%.

Based on a comparison of sales-to-new listings ratio with long-term averages, a small but growing majority of local markets are moving back into seller’s market territory (see chart below). As of September, it was close to a 60/40 split between seller’s and balanced markets.

There were 2.1 months of inventory on a national basis at the end of September 2021, down slightly from 2.2 months in August and 2.3 months in June and July. This is extremely low and indicative of a strong seller’s market at the national level and in most local markets. The long-term average for this measure is more than 5 months.

Home Prices

In line with tighter market conditions, the Aggregate Composite MLS® Home Price Index (MLS® HPI) accelerated to 1.7% on a month-over-month basis in September 2021.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 21.5% on a year-over-year basis in September, up a bit from the 21.3% year-over-year gain recorded in August.

Looking across the country, year-over-year price growth is creeping up above 20% in B.C., though it is lower in Vancouver (13.9%), on par with the provincial number in Victoria, and higher in other parts of the province (see table below).

Year-over-year price gains are in the mid-to-high single digits in Alberta and Saskatchewan, while gains are into the low double digits in Manitoba.

Ontario saw year-over-year price growth pushing 25% in September; however–as with B.C.–big, medium and smaller city trends, gains are notably lower in the GTA (19.0%) and Ottawa (16.4%), around the provincial average in Oakville-Milton (26.9%), Hamilton-Burlington (26.5%) and Guelph (26.4%), and considerably higher in many of the smaller markets around the province.

Greater Montreal’s year-over-year price growth remains at a little over 20%, while Quebec City is now at 12.7%. Price growth is running a little above 30% in New Brunswick (higher in Greater Moncton, a little lower in Fredericton and Saint John), while Newfoundland and Labrador is now at 12% year-over-year (a bit lower in St. John’s).

Bottom Line

Canada continues to contend with one of the developed world’s most severe housing shortages. As our borders open to a resurgence of immigration, excess demand for housing will mount. The impediments to a rapid rise in housing supply, both for rent and purchase, are primarily in the planning and approvals process at the municipal level. Liberal Party election promises do not address these issues.

It is noteworthy that while Canada suffers one of the most acute housing shortages, housing affordability is getting worse in many OECD countries (see chart below).

Adding to the affordability problem, interest rates have bottomed as an inflation-induced selloff in bonds mount despite the assertion of most central banks that inflation is temporary. Very recently, Governor Tiff Macklem admitted that inflation is likely to remain a problem until the end of the year.

Some of the inflation is coming from disruptions on the supply side emanating from COVID-related disruptions, which may work themselves out in time. However, they’re still getting worse, and many suggest the timeline could be much longer than just this year. In addition, extreme weather events and climate change initiatives–both of which are more or less permanent–have also boosted inflation pressure. Consumer demand for goods and housing and business capital expenditures have surged in the face of labour shortages. Wage rates are beginning to rise. All of this has raised prices spilling into next year. Higher interest rates are likely sustainable even though the Bank of Canada and the Federal Reserve will likely hold overnight rates steady for the next year (see charts below).

 

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Finding Your Financial Freedom

Mortgage Tips Kim Stenberg 14 Oct

Many Canadians will spend their entire lives without proper financial education. With the help of Enriched Academy, an online financial education platform, Our House Magazine has collected some insight and tips from experts on financial literacy to help Canadians achieve their dreams, from homeownership to a comfy retirement.

Money. It’s virtually impossible to get by in life without it, and everyone wants more of it. But many people struggle to manage their money and make it work for them. And all the stats are going in the wrong direction. More and more Canadians are struggling with debt and get by living paycheque-to-paycheque with no idea or strategy on how to turn it around.

Luckily there are many resources out there to help guide you in the right direction. How you use the information to form a strategy will determine your financial future. Jay Seabrook is the co-founder of Enriched Academy, an educational program dedicated to providing financial literacy and awareness to teens and adults.

He explained that most people don’t even get started on a healthy financial journey because of some basic money myths like, you need money to make money or it’s too complicated to understand.

Seabrook suggested there are two key metrics people need to be aware of: their net worth and how much is needed to save every month to reach financial freedom.

Net worth is a valuation of your assets minus your liabilities or what you own and subtracting what you owe. While a general rule of thumb is putting away 10 per cent of your pre-tax income a month, Seabrook suggested the number may not be enough to meet your financial goal. You’ll need to create a proper budget to determine that number you really need to put away to reach your goals.

He added by getting a handle on those two aspects and tracking them on a regular basis, chances of getting to financial freedom are dramatically higher.

Financial literacy is something deeply personal to the 42-year-old entrepreneur.

Like most people, Seabrook grew up with very little financial education. That reality hit home after college when he moved to Whistler, B.C. for work. While he was surrounded by some of the wealthiest people in the world, he couldn’t scrounge enough money for a ski pass – the purpose of moving to the resort community in the first place.

Seabrook didn’t turn his fortunes around until he met a mentor who showed him a path forward.

“Life is a buffet table of the things you can do, but I was on the bread and water part of the buffet table, and I have no idea how to get access to rest of it. It drove me crazy,” he told Our House Magazine. “I wanted this better life, but I didn’t know how to get it.”

By the mid-2000s, Seabrook got into the ground floor of an upstart mortgage company in Dominion Lending Centres. He eventually invested in the company and worked his way up to VP of operations. Along the way, he met his business partner and Enriched Co-founder Kevin Cochran, who was also finding success at DLC. The two entrepreneurs used their own personal experience and what they had learned over the years to create the educational platform. Enriched launched in 2011, and short time later Seabrook and Cochran got a break with a winning pitch to the Dragons’ Den that eventually grew to its current online education platform.

Now the two entrepreneurs are busy teaching the techniques and tools they’ve learned to a mass audience. Seabrook was quick to point out financial freedom won’t happen overnight, but it doesn’t take a lifetime to get there either.

“It’s actually a lot easier than people think,” he said, adding the “biggest hurdle for most people is suppressing the instant gratification of spending in the moment”.

“People spend their entire lives trying to make money, why? They want a nice lifestyle and get to a point where they can enjoy the best things in life, but if you don’t have a plan, you probably won’t get there. If you’re really serious about getting to a place where you make more money from passive income than all the hours you put in, you have to start learning it. If you get clear on some of your goals, you’ll get there.”

 

Published by DLC Marketing Team

Great News on the Canadian Job Front

Latest News Kim Stenberg 8 Oct

BLOCKBUSTER SEPTEMBER JOBS REPORT — FURTHER FUEL FOR RISING INTEREST RATES

Statistics Canada released the September Labour Force Survey this morning, providing some unmitigated good news on the jobs front. Employment rose by 157,000 (+0.8%) in September, the fourth consecutive monthly increase. The unemployment rate fell by 0.2 percentage points to 6.9%.

Employment gains in September were concentrated in full-time work and among people in the core working-age group of 25 to 54. Increases were spread across multiple industries and provinces.

Employment gains in the month were split between the public-sector (+78,000; +1.9%) and the private-sector (+98,000; +0.8%).

Employment increased in six provinces in September: Ontario, Quebec, Alberta, Manitoba, New Brunswick and Saskatchewan.

Service-sector increases (+142,000) were led by public administration (+37,000), information, culture and recreation (+33,000) and professional, scientific and technical services (+30,000).

Employment in accommodation and food services fell for the first time in five months (-27,000).

While employment in manufacturing (+22,000) and natural resources (+6,600) increased, there was little overall change in the goods-producing sector.

The gains in September brought employment back to the same level as in February 2020, just before the onset of the pandemic. However, the employment rate—that is, the proportion of the population aged 15 and older employed—was 60.9% in September, 0.9 percentage points lower than in February 2020, due to population growth of 1.4% over the past 19 months.

The number of employed people working less than half their usual hours was little changed in September and remained 218,000 higher (+26.8%) than in February 2020. Total hours worked were up 1.1% in September but were 1.5% below their pre-pandemic level.

Among 15-to-69-year-olds who worked at least half their usual hours, the proportion working from home was little changed in September at 23.8%. The ratio who worked from home was lowest in Saskatchewan (12.3%) and Newfoundland and Labrador (12.8%), and highest in Ontario (28.7%). Overall, at the national level, the proportion of workers who worked from home was higher in urban areas (25.2%) than in rural areas (15.9%).

In September 2021, 4.1 million Canadians who worked at least half their usual hours worked from home, similar to the level recorded in September 2020.

 

EMPLOYMENT RETURNS TO PRE-PANDEMIC LEVEL

The unemployment rate declined for the fourth consecutive month in September, falling 0.2 percentage points to 6.9%, the lowest rate since the onset of the pandemic. The unemployment rate peaked at 13.7% in May 2020 and has trended downward since, with some short-term increases during the late fall of 2020 and spring of 2021, coinciding with the tightening of public health restrictions. In the months leading up to the pandemic, the unemployment rate had hovered around historic lows and was 5.7% in February 2020.

The adjusted unemployment rate—which includes those who wanted a job but did not look for one—was 8.9% in September, down 0.2 percentage points from one month earlier.

Long-term unemployment—the number of people continuously unemployed for 27 weeks or more—was little changed in September. There were 389,000 long-term unemployed, more than double the number in February 2020.

The ability of the long-term unemployed to transition to employment may be influenced by several factors, including their level of education and current labour market conditions. For example, those with no post-secondary education face a labour market where employment in occupations not requiring post-secondary education was 287,000 lower in September 2021 than in September 2019 (not seasonally adjusted).

Bottom Line 

The Bank of Canada has repeatedly suggested that it would not begin to tighten monetary policy until the economy returned to full capacity utilization, which they estimate will not be until at least the second half of next year. Employment will need to surpass pre-pandemic levels before complete recovery is declared because the population had grown since the start of the crisis 19 months ago.

Substantial job losses remain in the hardest-hit sectors. The chart below shows the employment change in percentage terms by sector compared with February 2020.

Sectors where remote work has been widespread–such as professional, scientific and technical services, public administration, finance, insurance and real estate–have seen a net gain in employment. However, in high-touch sectors that were deemed nonessential, the jobs recovery has been far more constrained. This is especially true in agriculture, accommodation and food services, and recreation. Ironically, these sectors have high job vacancy rates as many formerly employed here are reluctant to return. Enhanced benefits and compensation in these sectors will help.

Just this week, the BoC Governor Tiff Macklem reiterated that widespread inflation pressures are likely to remain at least until the end of this year. Most are reflective of global supply chain disruptions as well as extreme weather events. Just how long these will last is uncertain, but tighter monetary policy would have little impact on this type of inflation.

Nevertheless, bond markets have sold off worldwide in response to inflation fears and the annual US debt-ceiling antics. The final chart below shows the steepening of the Canadian yield curve since one year ago. The 5-year bond yield has risen sharply over that period, from 0.378% to a current level today of 1.205%. It is no surprise that 5-year fixed mortgage rates are rising.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

The Cost of Downsizing Your Home

General Kim Stenberg 7 Oct

Moving to a larger house is not the only time that things can change with your home and mortgage. Sometimes there comes a point when owning a home becomes a little too much to handle; or maybe you’re an empty-nester and no longer need three extra bedrooms. Whatever the reason, downsizing is a great option when you no longer need a full size home. Perhaps you want to swap your two-story family home for a rancher, or maybe a cute little apartment or townhouse! Just as there are many options for individuals expanding families, there are just as many options for people wanting to scale down.

For homeowners who are fortunate enough to now be mortgage-free and looking to scale down, you could be sitting on a gold mine!

If you do still owe on your current mortgage, it is important to remember that downsizing during your current mortgage cycle, will be breaking the mortgage. This means, you will have to go through the entire qualification process again – including passing the stress test. The stress test is now required for all mortgages. Its purpose is to determine whether a homebuyer can afford their principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

Regardless of your current situation, there are some costs that go with selling your existing home and moving to something smaller or more affordable.

Some of the costs associated to downsizing are:

  • Realtor commission fees, which range from 2.5% to 5% of the home selling price
  • Closing costs and legal fees, which are 1% to 4% of the purchase price on the new home
  • Miscellaneous costs such as moving expenses, upgrading appliances and/or buying new furniture
  • If you are moving into a condominium or townhouse, there are strata fees to consider

WHY NOT CONSIDER A REVERSE MORTGAGE?

Most individuals looking to scale down are looking to do so for retirement or because they are now empty-nesters. However, if you are looking to downsize simply due to being unable to manage your mortgage or maintenance costs, there is an option called a “Reverse Mortgage”.

A reverse mortgage is a loan secured against the value of your home. It is exclusively for homeowners aged 55 years and older and enables the homeowners to convert up to 55% of the home’s value into tax-free cash!

With a reverse mortgage, you maintain ownership of your home and can use the loan to cover costs or pay out debts. The loan would need to be repaid in the event that you choose to move and sell the current home.

If you are looking to downsize your home, we can help! Contact me today to help make your next move a successful one.