Mortgages seem to always be the target of government intervention to limit household debt loads.  What about income taxes? An analogy to consider!

Stolen from a friend, but sums up Labour in Uk and NDP in British Columbia thinking very nicely……
The UK Tax system explained in beer.
Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100.
If they paid their bill the way we pay our taxes, it would go something like this: –
The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.
So, that’s what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem. “Since you are all such good customers”, he said, “I’m going to reduce the cost of your weekly beer by £20. Drinks for the ten men would now cost just £80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free but what about the other six men? The paying customers? How could they divide the
£20 windfall so that everyone would get his fair share? They realized that
£20 divided by six is £3.33 but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage. They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).
Each of the last six was better off than before with the first four continuing to drink for free.
But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10.″
“Yes, that’s right,” exclaimed the fifth man. “I only saved £1 too. It’s unfair that he got ten times more benefit than me.”
“That’s true” shouted the seventh man. “Why should he get £10 back when I only got £2? The wealthy get all the breaks.”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor”. The nine men surrounded the tenth and beat him up.
The next week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important –they didn’t have enough money between all of them to pay for even half of the bill.
And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.”

CANADIAN UNEMPLOYMENT RATE IN APRIL AT 6.5%–LOWEST RATE SINCE OCTOBER 2008 –BUT ANNUAL WAGE GAINS FELL TO ANOTHER RECORD LOW

Canada’s economy generated virtually no net new job growth in April, on the heels of a  multi-month employment rally that was the strongest in years. Employment has now increased in 15 of the last 17 months with growth over the last year averaging a solid 23,000 per month. The details of the monthly report for April were mixed (with a sharp pull-back in full-time jobs offset by stronger part-time employment) but, on average, more than two-thirds of job gains over the last year have been full-time.

Employment grew by just 3,200 jobs last month, well below the 10,000 forecasted by economists. On a year-over-year basis, however, there were 276,000 more people employed–up 1.5%–and the jobless rate was down 0.6 percentage points. Other positive signs include hours worked numbers that show gains of 1.1% over the past 12 months.

Despite the slowdown in job growth in April, the unemployment rate fell 0.2 percentage points to 6.5%, its lowest level since October 2008. According to Statistics Canada, the decrease reflected the departure of 45,500 people from the labor force. About half of those were youth, meaning many young people looking for work have stopped looking.
Employment among the population aged 55 and older rose by 24,000 in April, mostly in full-time work, and their unemployment rate declined 0.6 percentage points to 5.6%. On a year-over-year basis, people 55 and older had the fastest rate of employment growth (+3.6% or +133,000) compared with the other demographic groups. This is primarily the result of the continued transition of the baby-boom cohort into this older age group.

For men aged 25 to 54, employment declined by 20,000 in April, mostly in full-time work, and their unemployment rate increased 0.3 percentage points to 6.1%. Since August 2016, their employment gains have totalled 81,000. On a year-over-year basis, their unemployment rate was down 0.4 percentage points.

Among women aged 25 to 54, employment held steady in April and their unemployment rate was little changed at 5.1%. Compared with 12 months earlier, employment for this group was up 71,000 (+1.2%), virtually all in full-time work.

Employment for youth aged 15 to 24 was little changed in April, while their unemployment rate fell 1.1 percentage points to 11.7% as fewer of them searched for work. This is the lowest unemployment rate for youth since September 2008. On a year-over-year basis, youth employment was virtually unchanged.

Employment rose in British Columbia and Prince Edward Island, while it was virtually unchanged in the other provinces. In B.C., employment rose by 11,000 last month and the jobless rate was little changed at 5.5%. Job creation has been on a upward trend in the province with sizable increases in four out the past five months. On a year-over-year basis, employment was up 3.4% in B.C.

Although employment held steady in Ontario, the unemployment rate fell 0.6 percentage points to 5.8%, largely due to a decline in the number of youth searching for work. This is the lowest jobless rate for Ontario since January 2001.

In Alberta, April saw little job gain after a period of growth that began in autumn 2016. The jobless rate in the province was 7.9% in April, down 0.5 percentage points from the previous month as fewer people searched for work.

More people were employed in educational services, health care and social assistance, and transportation and warehousing in April. At the same time, employment declined in business, building and other support services, as well as in accommodation and food services.

Public sector employment increased in April, while the number of private sector employees fell. Self-employment was little changed.

Yet, the pace of annual wage rate increases fell to another record low.  The pace of annual wage rate increases for permanent employees fell to 0.5% in April, the lowest in records dating back to the late 1990s. The wages puzzle, which has been cited by the Bank of Canada as evidence of slack in the economy, persists. The weak wage growth is in sharp contrast to what would otherwise appear to be a labour market with little or no slack remaining.  To be sure, other measures of wages have been stronger (wage growth in the alternative (lagged) Survey of Employment, Payrolls and Hours (SEPH) was 2.4% year-over-year in February) but weaker numbers today from a wage perspective will likely continue to worry the Bank of Canada.

For historical perspective, wage gains have averaged 2.7% over the past decade. Adding to the mystery is that Ontario is the major source of wage sluggishness, with pay increases of 0.2% year-over-year. Full-time jobs also are showing slower wage gains than the national average. Clearly, businesses are very cost conscious, keeping labour costs muted, and economic uncertainty continues to depress the willingness of workers to demand higher wages. This concern can only be enlarged by growing trade tensions between the U.S. and Canada as President Trump continues to threaten to renegotiate NAFTA, already imposing punitive duties on soft wood lumber imports from Canada.

Trade tensions as well as a decline in oil prices to $45 a barrel (WTI) and the continuing troubles with Home Capital have added to downward pressure on the Canadian dollar as it has suffered the weakest performance of any of the Group of Ten currencies, now trading at 72.7 cents U.S.

While slightly more than a third of Canadian millennials now own a home, nearly two-fifths of them had help from parents to get into the housing market, says a new global study from HSBC.

Surveying home-buying attitudes and behaviour among 1,000 Canadians and a total of 9,000 people globally, HSBC found that 82 per cent of non-homeowner Canadian millennials intend to buy in the next five years, in line with the global average. But, like their counterparts worldwide, only half of them have set an approximate budget.

As housing markets continue to froth, particularly in the Greater Toronto Area, the survey offers a reminder to young house hunters to get their finances in order and align ownership dreams with market realities.

The gap between dream and reality is prevalent worldwide, according to HSBC’s study, Beyond the bricks: The meaning of home. It found that 64 per cent of millennials who don’t own homes will need a higher salary in order to buy, but the two-pronged problem of sluggish wage growth and rising property values “makes it unlikely that all will be able to achieve their goal.”

Here at home, it reinforces findings from previous research, including one last year from the Bank of Montreal. It found that 44 per cent of Canadian millennials expected help from parents when buying their first home, either in the form of a loan or gift.

“Nothing goes up forever, and if you can’t afford it, maybe you should continue to wait longer,” says Dave Nugent, chief investment officer of Wealthsimple, the Toronto-based online-only robo-adviser with a large millennial client base.

“If you talk to most young folks, they say ‘Yeah, I’m going to buy a house.’ You ask how much they save on a monthly basis, and far too often they don’t know. … It comes down to financial literacy and educating yourself,” Mr. Nugent says.

Across the globe, 36 per cent of millennial homeowners got help from mom and dad, versus 37 per cent for Canada. The United Arab Emirates had the highest rate of help, at 50 per cent, while France was the lowest, at 26 per cent. HSBC also found that one in five millennial homeowners, both in Canada and the across nine markets studied, had moved back in with their parents to save more for their deposit.

Canadians showed a slightly greater willingness to buy a “smaller than ideal place” than the rest of the world – 37 per cent of prospective buyers here said they would downsize, versus 33 per cent across all respondents.

Even as HSBC’s survey demonstrates young people are getting into the market, parental prop-ups are becoming a key tool to make it happen. Seven in 10 Canadian millennials told HSBC they had neither saved enough for a home down payment nor set a firm budget. Of those who had bought a home, 42 per cent said they spent beyond their budget.

Paul Mullins, HSBC Canada’s head of customer value management, said in an interview that the extent of parental contributions should not be alarming. “This ‘bank of mom and dad’ piece … has been in place for many years as one of the core contributors to the ability to get your leg on the rung of the property ladder,” he said.

Mr. Nugent warns that parents shouldn’t stretch themselves just to bestow a down payment for their kids. “Too often, you see parents dipping into their own [credit]. Then you’re going leverage on leverage; that’s a bit scary,” he said.

The hurdles to home ownership may be daunting, but Mr. Mullins said the survey’s results simply reinforce the need for financial preparedness and careful planning before trying to buy a home.

The HSBC research was not broken down by region. But home prices, especially in Toronto, continue to have many financial leaders and industry observers on alert.

Last fall, Canada Mortgage and Housing Corp. issued a “red” alert for the country’s real-estate sector, suggesting home buyers put more equity into down payments for safety. And last week, Royal Bank of Canada chief executive officer Dave McKay added his voice to a growing number of those suggesting that the Toronto market, like Vancouver’s, could benefit from cooling.

The study also found nearly half of Canadian millennials worked from their home, while only a third of them wanted to; meanwhile, 30 per cent of boomers worked from home, with 20 per cent of them wanting to. Millennials were defined in the study as having been born between 1981 and 1998.

Commentary: OSFI’s Testimony

 February 6, 2017   Robert McLister   1k 

Are regulators oblivious to the consequence of their own mortgage policies? That’s what certain industry stakeholders and MPs suggested to Parliament’s Standing Committee on Finance this past week.

Well, observers can now decide for themselves, based on officials’ own comments—starting with those of OSFI Assistant Superintendent Carolyn Rogers.

Rogers testified last week. Below are a sampling of her statements, with commentary on each…

• On the Destruction of Lending Competition: MP Dan Albas asked Rogers if the harm done to competition is a concern, stating, “We’re not just making life tougher for consumers, we’re also making the market less competitive.”
  .
  National Bank Financial (NBF) substantiated that concern in an unrelated report this week, stating: “…We believe increased portfolio insurance premiums could materially impair residential mortgage origination capabilities of mortgage finance companies (MFC)…Increased premiums shift both pricing power and market share control to balance sheet lenders like the Big Six Canadian Banks, highlighting that further downside risk could emerge for MFCs…We believe increased portfolio insurance premiums could materially impair MFCs’ ability to originate residential mortgages in the 65% to 80% LTV ratio range, which we estimate at 35% to 45% of (their) total residential mortgage origination, including insured and uninsured mortgages.”
  .
  Rogers, for her part, expressed no such concern. She responded to the MP’s question by acknowledging only that the government’s rules are having a “disproportionate impact” on bank challengers. Her testimony made little effort to elaborate on the serious “side effects” noted above. Nor did she make an attempt to help parliamentarians grasp the extent of those repercussions on consumers and lenders.
  .
• On Refinancing: Rogers stated that the new rule landscape “doesn’t preclude any one lender from doing refinancing.” This was either a tacit admission that she/OSFI doesn’t understand lenders’ funding challenges, or refuses to acknowledge them in public. For as every mortgage professional in Canada knows, there are indeed lenders who have lost their ability to offer refinancing to their customers. Most can still do refinances but with a serious rate handicap versus the major banks. NBF estimates that MFC rates on 80% LTV purchases and renewals have had to rise up to 30 bps due to premium changes alone. We’re seeing 15-50 bps rate premiums on MFC refis. A 15-50 bps rate disadvantage cuts the knees out from most securitizing non-bank lenders, pushing volume into the arms of OSFI-regulated lenders. This is solely the result of a deliberate government agenda.
  .
• One-sided Stress Tests: Rogers failed to elaborate on how her agency chose not to apply the new “stress test” to uninsured low-ratio mortgages. OSFI’s decision has created an enormous bank advantage over MFCs (which must apply the test to all mortgages, or incur much higher funding costs). OSFI could have coordinated with the Department of Finance to apply the same test to banks. This would seem logical given the Bank of Canada’s public warning that uninsured mortgage indebtedness (e.g., the ratio of uninsured borrowers with loan-to-income ratios over 450%) was rising to concerning levels. OSFI and/or the Department of Finance consciously chose not to subject banks to the same standard as insurers and (by extension) non-banks.
  .
• On the Policy-maker’s Intentional Failure to Consult Non-bank Stakeholders: Albas said he was told by officials in October that the government chose to only consult with the likes of major banks, despite roughly 2 in 5 mortgages being originated by non-bank lenders. Rogers had no answer to why policy-makers failed to confer with industry experts before making such game-changing rules.
  .
• On the Regional Aspect of OSFI’s Rules: Rogers stated that OSFI’s policies “are regionally neutral.” How this can be true when the new capital requirements specifically use location in their formula is anyone’s guess.
  .
• On Higher Resulting Mortgage Rates: Rogers essentially disclaimed responsibility for hiking costs on consumers, saying “Pricing decisions belong to the lender. We (OSFI) don’t set prices. We set capital requirements. And if lenders and insurers choose to pass the capital requirements on to consumers in the form of higher prices, that’s a business decision and not a regulatory decision.” Meanwhile, considerably higher funding costs have ravaged certain MFCs’ businesses, with some lenders reporting a 30 to 50%+ drop in year-over-year volume. Why? Because they had no choice but to terminate products and jack up rates, thus harming consumer choice. OSFI and the Department of Finance knew this would result from their capital changes, or at least they should have.

Rogers’ testimony omitted the true impact that OSFI’s capital changes are having in the marketplace, contained statements that could be interpreted as misleading, and failed to provide any substantive evidence justifying her agency’s changes. She delivered this testimony snidely at times, at one point scoffingly commenting, “I might have guessed…that was the source…” after it was revealed that an MP’s concern was related to a worry from mortgage firm DLC.

This hearing will cast serious doubt on OSFI’s credibility and motives. For as CMHC CEO Evan Siddall has stated, the market consequences of the government’s actions were “fully intended.” The rule changes thus appear to have been purposely targeted and premeditated based on false (or at least questionable) pretenses.

Government officials said in their testimony that they want consumers and the industry to be resilient to future potential shocks. That’s a worthy and necessary goal. But, we all must remember that the prior system:

• was a product of extensive prior rule tightening (over 30 new lending restrictions since 2008 alone)
• held defaults on MFC’s insured mortgages to half that of the major banks (MFC arrears were a minuscule 14 bps, said the Bank of Canada in December)
• limited prime mortgage arrears to a paltry 45 bps during one of the worst recessions on record
• was mostly based on a level playing field among lenders, unlike today.

Despite all this, regulators once again failed to share any meaningful evidence that Canada’s prior time-tested regulatory system:

• was immoderately risky
• justified OSFI’s and the Department of Finance’s devastation of non-bank lenders
• justified forcing hard-working Canadians to pay thousands more in interest.

In his questioning, MP Albas suggested policy-makers were “spinning” their position, to convince Canadians these rules are in their best interests, while simultaneously taking away critical financing options and raising costs on Canadian families. Rogers’ testimony did nothing to counter this charge. In fact, her statements demand legislators’ immediate scrutiny on her agency’s one-sided decisions, to confirm the unparalleled cost of those policies justify OSFI’s purported benefits.

Commentary: OSFI’s Testimony

 February 6, 2017   Robert McLister   1k 

Are regulators oblivious to the consequence of their own mortgage policies? That’s what certain industry stakeholders and MPs suggested to Parliament’s Standing Committee on Finance this past week.

Well, observers can now decide for themselves, based on officials’ own comments—starting with those of OSFI Assistant Superintendent Carolyn Rogers.

Rogers testified last week. Below are a sampling of her statements, with commentary on each…

• On the Destruction of Lending Competition: MP Dan Albas asked Rogers if the harm done to competition is a concern, stating, “We’re not just making life tougher for consumers, we’re also making the market less competitive.”
  .
  National Bank Financial (NBF) substantiated that concern in an unrelated report this week, stating: “…We believe increased portfolio insurance premiums could materially impair residential mortgage origination capabilities of mortgage finance companies (MFC)…Increased premiums shift both pricing power and market share control to balance sheet lenders like the Big Six Canadian Banks, highlighting that further downside risk could emerge for MFCs…We believe increased portfolio insurance premiums could materially impair MFCs’ ability to originate residential mortgages in the 65% to 80% LTV ratio range, which we estimate at 35% to 45% of (their) total residential mortgage origination, including insured and uninsured mortgages.”
  .
  Rogers, for her part, expressed no such concern. She responded to the MP’s question by acknowledging only that the government’s rules are having a “disproportionate impact” on bank challengers. Her testimony made little effort to elaborate on the serious “side effects” noted above. Nor did she make an attempt to help parliamentarians grasp the extent of those repercussions on consumers and lenders.
  .
• On Refinancing: Rogers stated that the new rule landscape “doesn’t preclude any one lender from doing refinancing.” This was either a tacit admission that she/OSFI doesn’t understand lenders’ funding challenges, or refuses to acknowledge them in public. For as every mortgage professional in Canada knows, there are indeed lenders who have lost their ability to offer refinancing to their customers. Most can still do refinances but with a serious rate handicap versus the major banks. NBF estimates that MFC rates on 80% LTV purchases and renewals have had to rise up to 30 bps due to premium changes alone. We’re seeing 15-50 bps rate premiums on MFC refis. A 15-50 bps rate disadvantage cuts the knees out from most securitizing non-bank lenders, pushing volume into the arms of OSFI-regulated lenders. This is solely the result of a deliberate government agenda.
  .
• One-sided Stress Tests: Rogers failed to elaborate on how her agency chose not to apply the new “stress test” to uninsured low-ratio mortgages. OSFI’s decision has created an enormous bank advantage over MFCs (which must apply the test to all mortgages, or incur much higher funding costs). OSFI could have coordinated with the Department of Finance to apply the same test to banks. This would seem logical given the Bank of Canada’s public warning that uninsured mortgage indebtedness (e.g., the ratio of uninsured borrowers with loan-to-income ratios over 450%) was rising to concerning levels. OSFI and/or the Department of Finance consciously chose not to subject banks to the same standard as insurers and (by extension) non-banks.
  .
• On the Policy-maker’s Intentional Failure to Consult Non-bank Stakeholders: Albas said he was told by officials in October that the government chose to only consult with the likes of major banks, despite roughly 2 in 5 mortgages being originated by non-bank lenders. Rogers had no answer to why policy-makers failed to confer with industry experts before making such game-changing rules.
  .
• On the Regional Aspect of OSFI’s Rules: Rogers stated that OSFI’s policies “are regionally neutral.” How this can be true when the new capital requirements specifically use location in their formula is anyone’s guess.
  .
• On Higher Resulting Mortgage Rates: Rogers essentially disclaimed responsibility for hiking costs on consumers, saying “Pricing decisions belong to the lender. We (OSFI) don’t set prices. We set capital requirements. And if lenders and insurers choose to pass the capital requirements on to consumers in the form of higher prices, that’s a business decision and not a regulatory decision.” Meanwhile, considerably higher funding costs have ravaged certain MFCs’ businesses, with some lenders reporting a 30 to 50%+ drop in year-over-year volume. Why? Because they had no choice but to terminate products and jack up rates, thus harming consumer choice. OSFI and the Department of Finance knew this would result from their capital changes, or at least they should have.

Rogers’ testimony omitted the true impact that OSFI’s capital changes are having in the marketplace, contained statements that could be interpreted as misleading, and failed to provide any substantive evidence justifying her agency’s changes. She delivered this testimony snidely at times, at one point scoffingly commenting, “I might have guessed…that was the source…” after it was revealed that an MP’s concern was related to a worry from mortgage firm DLC.

This hearing will cast serious doubt on OSFI’s credibility and motives. For as CMHC CEO Evan Siddall has stated, the market consequences of the government’s actions were “fully intended.” The rule changes thus appear to have been purposely targeted and premeditated based on false (or at least questionable) pretenses.

Government officials said in their testimony that they want consumers and the industry to be resilient to future potential shocks. That’s a worthy and necessary goal. But, we all must remember that the prior system:

• was a product of extensive prior rule tightening (over 30 new lending restrictions since 2008 alone)
• held defaults on MFC’s insured mortgages to half that of the major banks (MFC arrears were a minuscule 14 bps, said the Bank of Canada in December)
• limited prime mortgage arrears to a paltry 45 bps during one of the worst recessions on record
• was mostly based on a level playing field among lenders, unlike today.

Despite all this, regulators once again failed to share any meaningful evidence that Canada’s prior time-tested regulatory system:

• was immoderately risky
• justified OSFI’s and the Department of Finance’s devastation of non-bank lenders
• justified forcing hard-working Canadians to pay thousands more in interest.

In his questioning, MP Albas suggested policy-makers were “spinning” their position, to convince Canadians these rules are in their best interests, while simultaneously taking away critical financing options and raising costs on Canadian families. Rogers’ testimony did nothing to counter this charge. In fact, her statements demand legislators’ immediate scrutiny on her agency’s one-sided decisions, to confirm the unparalleled cost of those policies justify OSFI’s purported benefits.

Borrowed from Kathleen Dediluke via the DLC network… supporting documents is the name of the game!

WHY SO MANY MORTGAGE DOCUMENTS?

Documents, documents and more documents. Yes that’s right you will need to provide your Dominion Lending Centres mortgage broker with as many documents that we request upfront as possible. Why? Because the more supporting documentation you have available will help us as brokers to find you your best mortgage options. If you don’t have everything on hand e-mail a PDF of what you have and start digging up the rest as soon as possible.

Why so many documents you ask? While the lending market isn’t what it used to be, it is now much more strict and complex then a few years ago. Lenders are asking for WAY more documentation before they will lend you money. Yes, there have been instances of mortgage fraud that likely led to more scrutinized lending and Government regulations that lenders have to abide by are always changing. Mortgage lenders need to protect their investors and help ensure our Canadian housing market remains strong.

It may seem like a pain but ask yourself this if you had a large amount of money would you lend it out to somebody without proof they have income stability and/or the means to pay it back? Pretty sure your answer is no (at least mine is).

Below is a list of typical documents lender and mortgage insurers request. If you would like a tailored list please contact your DLC Mortgage Professional to discuss your application.

Income – lenders are looking for proof of income stability.

Self-employed Income

* 2 years of Income Tax Returns, Business Financials, CRA Notice of Assessments. Often it’s best to have your accountant e-mail them to us so no pages are missing.

Rental income

* Lease agreements

* T1-General tax returns with the Statement of Real Estate Activities. If you don’t claim your rental income let us know as this may affect how your mortgage is approved.

* Proof of the rental income being deposit on a regular basis into your bank account.

Guaranteed Employment Income

* A couple of recent pay stubs

* A job letter confirming your position, guaranteed pay and hours, if you are seasonal, contract or any specific information that relates to your income stability. Lenders will call your employer to verify the letter and ask for more information as possible. (Sample Job Letter)

* 2 Years of CRA Notice of Assessments

* 2 Years T1-Generals

Commission, Overtime, Seasonal, Contact or Bonus Income.

* A couple of recent pay stubs

* Job letter

* 2 years of T1-General Income tax returns

* 2 years of CRA Notice of Assessments

Liabilities – We will see most of your consumer credit accounts on your credit report however we may require some additional paperwork

* Current mortgage statements

* Property tax statements and proof of payment

* Child Support Payments proof via court orders and bank statements

* Alimony via Separation Agreements

* Proof your income tax has been paid. This is the most important item to pay because the Government has more power than the lenders. If you are wanting to refinance your mortgage to pay CRA contact us to discuss your options.

* Proof debts have been paid. If a zero balance is require you must show the account at a zero balance or the current balance and the proof of payment

Down Payment & Closing Costs

* The last 90 days of savings history. Any larger deposits have to be sourced.

* Gift Letter (some lenders have prescribed forms)

* Statement showing gift deposited into your account

* Property sale contracts and mortgage statements

About Documentation from Financial Institute

* Must have account ownership proof. For example e-statements are the best as they typically have your name, account number and the providers details already on the statement

* Screenshots work if the providers logo/name are clearly shown on them as well as the account holders name. If the account number only shows then you will have to provide an additional document from the provider with both your account number and name.

* If you are having your account history printed at a Teller please have the Teller stamp the paperwork

Documentation varies by applicant and lender. Be prepared by contacting your mortgage professional today for your tailored documents list.

CANADA SHOWS UNEXPECTED STRENGTH WITH JOB SURGE AND TRADE SURPLUS

December’s jobs report was unambiguously strong showing employment gains of 53,700 (0.3%), the result of gains in full-time work. Finally, for the first time this year, full-time jobs outpaced part-time. The unemployment rate increased 0.1 percentage points to 6.9% as more people entered the labour force. This is evidence that the economy may be absorbing the slack that’s kept interest rates near record lows.

Full-time positions rose 81,300 in December from the previous month, the biggest gain since March 2012, and even after taking away 27,600 part-time jobs, the total employment gain of 53,700 shattered the economist forecasts for a small decline.

For 2016 as a whole, employment grew by 1.2%, compared to a growth rate of 0.9% in 2015. Payrolls rose by 214,000 last year, the fastest December-to-December growth since 2012.

Quebec and British Columbia posted job gains in December, while there was little change in the other provinces. In 2016, BC recorded the fastest employment growth rate among the provinces for the second consecutive year, up 3.1%. The gains were evenly split be tweet full- and part-time work and spread across many industries.

In another report, Canada’s trade balance returned to surplus in November for the first time since September 2014, moving from a $1.0 billion deficit in October to a $526 million surplus in November. Exports rose 4.3% on the strength of increased exports of metal and non-metallic mineral products as well as record exports to countries other than the US. Imports were up 0.7%, mainly on higher imports of energy products.

The data may signal Bank of Canada Governor Stephen Poloz’s long-awaited economic revival is finally on solid ground. Poloz has stressed ahead of his Jan. 18 rate decision that there is still plenty of slack in the job market which may be adding to divergence with a recovering US economy.

The job gain made the fourth quarter the best since 2010 and turned 2016 into a breakout year from some of the slowest hiring since World War II. The trade surplus means struggling energy and manufacturing companies may contribute to growth aided by debt-fueled consumer spending on houses and cars.This would be just in time to help offset what is likely to be a slowdown in housing in Canada this year in the wake of federal government mortgage initiatives to tighten mortgage credit conditions.

Provincial Unemployment Rates in December In Descending Order (percent)
(Previous months in brackets)

BC INTRODUCES INNOVATIVE NEW PROGRAM TO HELP FIRST-TIME HOMEBUYERS

In a move to help BC citizens and residents buy their first home, the BC government announced today that it is launching a new program to augment down payments for first-time buyers. The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to 5% of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the program, the Province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.

During the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.1Íž

Applications will be accepted starting January 16, 2017. This will be a three-year program with loans advanced from February 15, 2017 until March 31, 2020.

ELIGIBLE HOMEBUYERS

All individuals with a registered interest on title must reside in the home and:

• Be a first-time homebuyer
• Have been a Canadian citizen or permanent resident for at least five years
• Have resided in BC for at least 12 months
• Have a combined gross income of $150,000 or less
• Have saved at least half of the minimum down payment they will require
• Must be pre-approved for the first mortgage before applying

The first mortgage must be high-ratio insured from an NHA approved lender for more than 80% of the purchase price.

ELIGIBLE PROPERTIES

Any legal, self-contained, mortgageable residence located in BC

• Must be used as a principal residence for the first 5 years
• Rental properties and seasonal or recreational properties are not eligible
• The purchase price cannot exceed $750,000

HOME PARTNERSHIP LOANS

• Up to 25-year term, registered as a second mortgage
• No interest or principal payments for the first 5 years
• Monthly principal and interest payments begin in year 6, amortized over remaining 20 years
• Interest rate for years 6 to 10 set near first mortgage rate at time mortgage is registered
• Interest rate reset to near first mortgage rate at years 10, 15, and 20
• Homeowner may repay in full or part at any time without penalty.

The loan is due and payable in full upon

• The home ceasing to be the primary resident in the first 5 years
• Default on the first mortgage
• Sale of home or change of ownership
• Any other default on the Home Partnership second mortgage

Bottom Line: This is a bold and innovative step to help potential new buyers to meet the greatest hurdle of first-time homeownership—the down payment. The Federal Government’s new mortgage regulations released in October hit first-time homebuyers hard, so this program will be welcome relief for B.C. residents. The B.C. government estimates that it will make more than 42,000 new loans over the three-year life of this program, amounting to $703 million in new funding available for qualified first-time homebuyers to come up with their down payments. This is particularly important for BC, which has the highest home prices in Canada.

It is no surprise to anyone that the Bank of Canada maintained its target overnight rate at 1/2 percent today, judging that although the global economy has strengthened, uncertainty continues and is damaging business confidence and dampening investment in Canada’s major trading partners. Since the Trump victory, US interest rates have risen sharply with the expectation of sizable fiscal stimulus. Stock markets in the US have risen to record highs and the TSX has enjoyed a huge upsurge reflecting a sharp rise in bank stocks–up more than 20 percent this year. Canadian interest rates have increased sharply as well, as the yield curve has steepened, which is good for bank profitability. However, it is not good for Canadian housing. Mortgage rates have already risen in Canada in the past month and more is likely to come as potential homebuyers are already struggling with more stringent qualifying criteria and particularly non-bank lenders are confronted with new mortgage insurance rules.

Housing Slowdown Highlighted

The Bank highlighted that household debt ratios will continue to rise, but these will be mitigated over time by the announced changes to housing finance rules.Even before the unanticipated rise in mortgage rates in October, the Bank revised down its economic forecast in large measure because of the federal government’s new initiatives “to promote stability in Canada’s housing market”. The Bank of Canada reported that these measures are “likely to restrain residential investment while dampening household vulnerabilities.” 

According to the October Monetary Policy Report, the housing initiatives were expected to dampen 2016 GDP growth by 10 basis points and by 30 basis points next year. Government sources say they expect the growth in housing resales to decline 8 percentage points in 2017 from the forecasted 6.0 percent growth pace this year. Private estimates of the negative impact of the new housing measures on overall economic growth vary, but most expect the contractionary effect to be roughly a 30-to-50 basis point reduction in growth over the next twelve months. Given that baseline potential growth is less than 2 percent, this is a very material dampener.

Even before the mortgage rate hikes, we have seen housing resales slow significantly in Vancouver and the surrounding region. Particularly in the single family sector, resales and prices have fallen. This has been attributed to the August introduction of a new 15 percent land transfer tax on non-resident purchasers. Anecdotal evidence suggests that foreign buyers have shifted their sights to some US cities, notably Seattle, as well as Toronto and Montreal, but it is too early to have any hard data. Indeed, CMHC recently reported that foreign ownership of Canadian real estate is less than 3 percent nationwide and only as high as 5 percent in Vancouver and somewhat less in Toronto Central.

The Canadian economy overall has behaved pretty much as the Bank expected, rising sharply in the third quarter in a partial bounce back from the dismal first half. Consumer spending was strong, owing in part to the new Canada Child Benefit, while federal infrastructure spending has yet to show up in the data. Growth in the current quarter is expected to be far more modest as business investment and trade continues to disappoint. Moreover, we now face the prospects of a Trump-led renegotiation of NAFTA next year.

Canadian inflation remains in check. The real question is how much further US yields will rise, pushing Canadian bond yields and borrowing costs higher. There is far more slack in the Canadian economy than in the US, despite the spate of strong employment gains. The Bank does not expect the economy to be operating at full capacity until 2018.

In contrast, it is all but certain that the Federal Reserve will hike interest rates by 25 basis points when they meet again in mid-December. Prospects are we will see two or three additional Fed rate hikes next year, while the Bank of Canada holds steady. This will put further downward pressure on the Canadian dollar, which might be offset in part if oil prices continue to edge higher in response to the recent OPEC decision to cut production (if it holds). Oil prices had recently risen to over $50 a barrel for West Texas Intermediate, although it has sold off sharply today.

The US economy is operating at or near full capacity as the jobless rate fell in November to a mere 4.8 percent. To be sure, there remains troubling evidence of underemployment and the labour force participation rate of prime age workers in the US has fallen sharply, well below the level in Canada (see Chart). President-elect Trump is planning to cut taxes and increase government spending as well as to take initiatives to secure new and existing American jobs. To the extent he is successful, the Federal Reserve will continue to tighten monetary policy, hiking interest rates more than expected.

Some have suggested that the Bank of Canada might cut interest rates again next year, particularly if housing slows too much. Judging from comments made by the CEO of the CMHC, a slowdown in housing is the intended result of the new rules. Clearly, Governor Poloz sees the enhanced mortgage stress tests and changes in the insurability of mortgages as mitigating his concerns of overextended homebuyers. It would take a material negative shock to growth for the Bank to cut rates.