How the interest rate drop affects your mortgage and the Home of the Week: Canadian real estate news for July 26

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Here are The Globe and Mail’s top housing and real estate stories this week and one home worth a look.

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Just over 80% of new condo investors in Toronto are losing money on their rentals

A new report says that new condo investors in the Toronto region are finding the rental income from their units is not covering the increased mortgage and other costs of owning the property, writes Rachelle Younglai. The report found that average monthly ownership costs in the Toronto and Hamilton region have climbed to $3,250 due to the higher cost of new condos, borrowing and other expenses. At the same time, monthly rental rates for a new condo in the region hit a record $2,700 — but still not enough to cover investor’s expenses. The losses are dissuading investors from buying new condo units, leading to the lowest sales in 27 years in the first half of this year.

Falling interest rates mean larger penalties for breaking your fixed-rate mortgage

In a widely-anticipated move, the Bank of Canada lowered its benchmark interest rate to 4.5 per cent on Wednesday in an announcement that put new emphasis on downside risks to economic growth and teed up additional rate cuts this year. However, the rate cut is unlikely to dramatically alter the math for anyone buying a home or renewing their mortgage in the next month or so, writes Erica Alini. A decrease of another quarter of a percentage point will translate into only marginally lower variable mortgage rates, but fixed-rate mortgage holders need to especially watch out for prepayment penalties. If you’re looking to get out of your mortgage early, lenders will charge you a fee that compensates for the mortgage interest payments you won’t be paying. And — you guessed it — those fees tend to get larger when interest rates fall.

Rob Carrick: The latest interest rate cut means it’s time to stop hating on variable-rate mortgages

Variable-rate mortgages were never God’s gift to borrowers, even if that’s how it seemed a few years ago when interest rates were at generational lows. And just the same way, they’re not as treacherous as they’re widely considered to be right now, writes personal finance columnist Rob Carrick. After this week’s Bank of Canada rate cut, don’t dismiss variable-rate mortgages out of hand if you’re buying or renewing. The latest drop in the overnight rate will decrease the prime and rates on variable-rate mortgages by one-quarter of a percentage point. But the impact will be felt differently. Adjustable-rate options offer potential for borrowers to either reduce mortgage payments and increase household cashflow, or keep payments level and pay down additional principal.

Tenant groups call for scrutiny of American software company after U.S. lawsuits alleging rent collusion

Canadian tenants are pushing for greater scrutiny of a suite of software tools used by corporate landlords to provide recommendations on how much to raise rents, writes Shane Dingman. According to allegations in more than 30 lawsuits filed in U.S. state and federal courts over the past two years, software owned by property management software company RealPage Inc. is accused of being a form of high-tech collusion because it compares prices and data between competitors, who accept 80 to 90 per cent of its recommendations for market rents. The lawsuits contain allegations that have not yet been tested in court, but tenant organizations in Canada say they believe many large Canadian landlords use similar software as well, and are pushing for the federal and provincial governments to investigate further.

Home of the Week: A work of art surrounded by the nature of B.C.’s Bowen Island

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931 Ocean Park Lane, Bowen Island, B.C. — Full gallery here

The five-bedroom home is located atop a rocky outcrop on the southern shore of Bowen Island, a small community west of Vancouver. From afar, it almost looks like several houses merged together — the principal architect on the home said they wanted it to feel like three to four houses “nestled together like a village.” The home itself melds into the living rock of the cliff, with walls of windows providing views of the water and a combined kitchen, living room and indoor-outdoor covered deck just past the bedroom wing. All across the home, the ceilings themselves are a work of art, with Douglas fir beams floating above white walls and glass, almost evoking the imagery of an upturned boat.