Good morning. We crunch the numbers on Canada’s new mortgage rules – more on that below, along with (speaking of numbers) Rogers’ massive $4.7-billion takeover of Maple Leaf Sports & Entertainment and Ottawa’s fresh cuts to temporary foreign residents. But first:
Today’s headlines
- Israel bombs Lebanon and arrests an Israeli man in an alleged assassination plot against Netanyahu
- A CSIS report says India and China use illegal funds and disinformation to sway Canadian politicians
- The Canadian Medical Association apologizes for harms to Indigenous people
Could a house like these soon be yours?Sammy Kogan/The Globe and Mail
Housing
Canada’s mortgage makeover
First came the announcement: The federal government had a brand-new pair of mortgage rules, meant to make it easier for buyers to afford pricier homes. Then came the phone calls: Real estate agents and mortgage brokers tell The Globe they’ve been flooded with questions from clients and borrowers, who want to know just how much they’ll save in monthly payments and if they could trade in the condo listings for townhouses with a garden.
When Ottawa’s new rules go into effect Dec. 15, Canadians will be able to snag a mortgage with default insurance – which is required if your down payment is under 20 per cent – for homes worth as much as $1.5-million, up from a $1-million cap. First-time buyers can also stretch out their payments over 30 years, instead of a maximum of 25, as can anyone purchasing a new build.
Sounds pretty good – but those prospective buyers might be getting ahead of themselves, since, inevitably, the devil’s in the details. My colleague Erica Alini, The Globe’s personal finance reporter, dug into how exactly these measures could change the math for homebuyers. Let’s break it down.
What the new rules will do
They will make it easier for first-time buyers to purchase a home, especially those looking to crack the markets in Vancouver, Toronto and other parts of Ontario where prices routinely top $1-million. With the caveat that we’re still talking major bucks here, down payments could shift from hundreds of thousands of dollars to tens of thousands instead.
To show how these rules work together, Alini offers the example of a first-time buyer eyeing a $1,082,200 property, which is the average home price in Toronto. Right now, to obtain a 25-year mortgage, they’d need to put 20-per-cent down. But they couldn’t purchase insurance on the mortgage, since the home costs more than $1-million, so the lowest five-year fixed rate available to them on Ratehub is 4.79 per cent. That shakes out to a down payment of $216,440 and monthly payments of $4,932.
As of mid-December, however, this newly insured first-time buyer would get a better five-year fixed rate – 4.09 per cent on Ratehub – and an extra five years on their mortgage. Better still, they could get away with a 7.69-per-cent down payment. All together, that wouldn’t make much of a difference in their monthly payments, which come to $4,993. But it would mean they’d only have to pony up $83,220 to buy the house.
Here’s the catch: Taking five years longer to pay off a considerably larger mortgage really, really adds up. Our prospective home buyer would have to shell out an additional $144,754 in interest, which might prove a problem for their future selves.
The Globe and Mail
What the new rules won’t do
Well, they won’t magically construct houses, and this country still needs a whole bunch of them: Canada has to build 320,000 units a year for the next six years just to meet the new demand that existed before these relaxed mortgage rules were introduced. We’re not doing anything close to that yet. (And who will build these homes? Hard to say: The construction industry faces a serious labour shortage.) Easing the barrier to enter the real estate market means more competition for the houses left right now, which could drive prices even higher.
Then there’s the nearly $150,000 in interest that’ll have to be scrounged up from somewhere. Already, Canada’s household debt burden is one of the very highest in the world. While we curbed our borrowing a bit of late, the average household still owes around $1.76 for every dollar of disposable income. If, at the end of 2024, Canadians take advantage of these new rules to grab costly homes and 30-year mortgages, it’d be worth checking back in on that debt-to-income ratio when 2054 rolls around.
What do you think?
The Globe wants to know what you make of Canada’s mortgage measures. You can click on this (non-paywalled) link to tell us how the new rules will affect your plans to buy a home.
The Deal
A slam dunk for Rogers?
Heads up, Scottie Barnes: Rogers now owns 75 per cent of MLSE.Petre Thomas/Reuters
With its $4.7-billion purchase of BCE Inc.’s stake in Maple Leaf Sports & Entertainment, Rogers Communications Inc. takes control of professional sports in Toronto. (Congrats?) The Globe has every angle of this blockbuster move covered: Andrew Willis explains its inner workings and why executive chair Edward Rogers has long sought it out, while Tim Kiladze digs into why Bell was finally motivated to sell. Rogers already owns the middling Toronto Blue Jays; will this deal change the prospects of the equally middling Maple Leafs, Raptors, Argonauts and FC? Cathal Kelly suspects not, but Simon Houpt does clarify what the buy out means for people who still want to catch those teams on TV.
The Wrap
What else we’re following
At home: The Liberals live to rule a little longer, as the Bloc Québécois says it will vote against a Conservative party non-confidence motion next week. Prime Minister Justin Trudeau will, however, be without his Transportation Minister: Pablo Rodriguez is resigning to enter the Quebec Liberal leadership race.
Abroad: Hungary denies that a local company made the pagers used by Hezbollah, deepening the mystery over how thousands of pagers exploded in Lebanon.
New cut: The U.S. Federal Reserve gave interest rates a hefty chop – half a percentage point – yesterday, with the first rate cut in four years.
New cuts: Ottawa will clamp down on temporary foreign residents even further, tightening the cap on international students and limiting work permits to the spouses of foreign workers in certain jobs.
Old jets: Researchers have spotted two enormously powerful plasma streams – dating back to when the universe was a mere 6.3 billion years old – blasting out of a supermassive black hole 7.5 billion light years away.