The Canadian Press

The Bank Canada raises its key interest rate target by a quarter of a percentage point.

The central bank’s target for the overnight rate is now set at 1.75 per cent.

The Bank of Canada is hiking its trend-setting interest rate as the resilient economy hums along and a big source of trade uncertainty is finally out of the way.

The central bank delivered a quarter-point rate increase for the fifth time since the summer of 2017 _ and first time since July _ to bring the benchmark to 1.75 per cent.

It was the bank’s first rate decision since Canada agreed with the United States and Mexico earlier this month on an updated North American free trade deal.

The bank says in a statement that more hikes will be needed, but this time around it omitted the word “gradual” from its explanation on how it will approach future rate increases _ something that could lead some observers to anticipate future increases will come faster than they had previously expected.

But the bank says the pace of the increases will continue to be guided by how well households are digesting the higher interest rates, given their elevated levels of debt.

The bank says households have already made spending adjustments in response to earlier rate hikes and stricter mortgage policies _ and credit growth continues to moderate.

To many people your credit score is this shadow that follows you around your entire financial life that you don’t understand. You know its there, you know it affects you, but you don’t want to look at it too hard until you must. This is understandable, no one makes you look at it and until you need it it’s very easy to pretend it doesn’t exist. So, let’s start with the basics.

What is your credit score – Your credit score is a number that reflects to a lender how likely you are to repay a loan. This number ranges from 300-900 with the magic number (for the most part) being 650. If you’re below 650, you’ll have a hard time getting a traditional lender like a bank or credit union to lend to you.

What factors affect your credit score – Your credit score is affected by your payment history, your credit vs. your available credit, the length of your credit history, public records, and number of inquiries into your credit file. The two factors that affect you the most are payment history with a weight of roughly 35% of your credit score and your used credit vs. your available credit, also called ‘utilization’, with a weight of around 30%.

What you can do to change your credit score – As mentioned above, the two major factors are your payment history and your used vs. available credit. Payment history is the more difficult to change out of the two, you need to ensure that all your bills are always being paid and on time. This requires dedication and eventually, over the course of a few years, missed payments will disappear and your credit score will rise.

In the short term however, it is much easier to affect your credit score by understanding how utilization affects it. Utilization, as stated above, is your used credit vs. your available credit and ideally this percentage should be under 50%. Say you have a credit card with a $5,000 limit with $4,500 on it, and a line of credit for $20,000 with $3,000 on it, in this case the credit card is at 90% utilization which is above the target and will be affecting your score negatively. You can get yourself to 50% utilization in a couple ways, the most obvious being putting enough of a payment on the credit card to bring it back under that 50% mark. If this isn’t something you’re able to do, try shuffling money from one debt source to another. Taking $3,000 from your line of credit and putting it on your credit card will bring the credit card down to 30% utilization. Another way is to call the credit card company and see if you can get your credit limit raised to a point where your utilization is in a better situation. If you use any one of these tips alone or in combination, you will see an immediate result on your credit score that will help bring you to that magic number.

Your credit score can be a very confusing thing to understand. If you need help managing yours contact Family Lending and their mortgage professionals will do all they can to get you where you need to be.

There are very few issues that get as heated when discussed as property taxes. Everywhere from Facebook groups to coffee shops sees people getting up in arms about the amount of taxes that are paid on homes and businesses. Everyone has an opinion, but how exactly do our property taxes work? How are they calculated? Why do they go up? Who determines exactly what a property is worth?

Municipalities get their revenue from multiple sources, in Chatham-Kent property taxes account for approximately 50% of the budget with the other 50% being accounted for from other sources such as provincial and federal grants, user fees, licenses, and other smaller sources. These sources must account for the entire budget for any given year as each budget needs to be balanced, municipalities are forbidden by law to run a defect. This means that if there needs to be an increase in spending, the municipality needs to account for it somewhere within the budget that given year and one of the sources that can be changed is your property taxes.

A property’s value is determined by a company called Municipal Property Assessment Corporation or MPAC, you’ve most likely at one time or another received their notice of assessment in your mail. They administer property tax assessments and appeals of assessment for all of Ontario and will revaluate a property every 4 years. They determine what your home is worth by the evaluation of properties across the municipality and your taxes will go up or down based on how your property stacks up. If your property value goes up at the same rate as the municipal average the taxes on your property will stay the same, if its value increase exceeds the municipal average your taxes will go up, and inversely if the value is considered less it will go down. MPAC’s assessment multiplied by the tax rate set by the municipality is how your property tax bill is calculated. The idea of having tax rates go up and down based on comparisons is true in relation to industries as well. For example, farmland is assessed at a higher value when compared to residential taxes, therefore residential tax rates are lower than those relating to agriculture.

On an average 1,200 square foot home, Chatham-Kent has a current property tax rate of 1.88%, which is above the provincial average of 1.26% however, our actual property tax payments are below average at $3,127 from the provincial $3,346. Why is the rate the way it is? Low housing costs mean that the same property in London or Sarnia will be assessed at a higher value than one in Chatham-Kent. A 1,200 square foot home in Chatham-Kent is assessed at $165,500 as opposed to the provincial average of $265,725, so if the rate was the same there would be a significant tax gap.

Chatham-Kent is a very large municipality geographically as well, it’s one of the many things people enjoy about living here as there is lots of room to spread out. As a result of this freedom however, CK has a low population density with an average of 42 people per square km, comparing that with Sarnia at 451, London at 959, and Windsor at 1552, this results in a significant logistical challenge as services must cover a much larger area to reach fewer people. Low population density leads to more infrastructure to support the tax payers as well. In our Municipality we have 4,800km of drains (20% of Ontario drains), 850+ bridges, 3,588 km of paved roads and 3,264 km of gravel roads. With all this infrastructure with relation to our population density and home values, the only way to keep the budget healthy is with a higher property tax rate.

Lately, most tax increases have been to cover the cost of maintaining this infrastructure. Mike Turner, CFO for the municipality, thinks that the municipality has done a great job of managing this increase, “Over the last 4 years we’ve increased spending on infrastructure with only 1.39% tax increase which comes in well below inflation.” To put that in perspective that’s about $30 a year on our 1,200 square foot home.

So, while rates in Chatham-Kent may still be higher than the Ontario average, due to a low population density, large geographic area, and low property prices, Chatham-Kent is still able to manage their infrastructure while keeping tax increases below inflation levels.

by Michael Heath

Housing market dangers are “especially acute” in Australia, Hong Kong, Canada and Sweden, Oxford Economics said, noting this has historically posed a threat to economic activity.

“In all four, valuations are very elevated, there has been a lengthy housing boom, debt levels are high and there is a significant share of floating rate debt,” Adam Slater, lead economist at Oxford, said in a research note.

On the positive side, it notes risks are relatively limited in key markets like the U.S., Germany, France, China and Japan. In addition, across most economies there has been no significant recent rise in mortgage rates, which have even fallen in some cases.

“So, the classic ‘trigger’ for house price declines is largely absent,” Slater said. “However, rising rates are not strictly necessary for prices to start falling.”

House prices are falling in Australia, down almost 3 percent in the year through August in major cities, and 5.6 percent in the Sydney market. Meanwhile, three of the nation’s four major banks raised mortgage rates in recent weeks, blaming higher funding costs. The increases came even as the central bank leaves official rates at a record low.

Oxford said it compared markets across OECD countries from 1970 to 2013 and found a clear negative relationship. Where valuations had risen 35 percent or more above the long-term average over that period, real house prices fell 75 percent of the time over the following five years, it said.

“This points to many OECD countries seeing stagnant or negative real house price growth in the next few years: the scope for a further house price ‘melt-up’ in highly valued markets looks extremely limited,” Slater said.

Stretched valuations also matter because house price changes can have a significant impact on economic activity, Oxford said, citing a sample of 83 house price booms. It also found house prices tended to fall after booms, and often substantially.

“For the G7 countries, we find a positive relationship between consumer spending and real house prices from 1997, albeit possibly weakening in recent years,” Slater said.

Copyright Bloomberg News

Good news for Toronto mortgage brokers—the market appears to have rebounded.

Numbers released by the Toronto Real Estate Board for the month of August reveal an 8.5% boost in sales over the same month last year, signifying an adjustment to market realities spurred by B-20 and the Fair Housing Plan.

In total, 6,839 homes were sold throughout the Greater Toronto Area last month for an average selling price of $765,270—a 4.7% increase over August 2017.

Even more positive is the fact that August marked the third consecutive month of year-over-year sales growth in the GTA.

Garry Bhaura, TREB’s president, credits the buoyant sales figures to homebuyers who held off on purchasing, because of stricter mortgage qualification criteria and the Fair Housing Plan, entering the market.

“It is encouraging to see a continued resurgence in the demand for ownership housing,” he said in a statement.

Much of the load is being carried by Toronto’s hot condominium market, which managed to slog through the languid sales cycle that chilled the city earlier this year.

“The condo market is still on fire—it never slowed down,” said Mortgage Outlet’s Principal Broker Shawn Stillman. “Even month-over-month, the price per square foot is hitting new highs, and they’ve always been strong. Where the weakness is, however, is in the 905 area. People who bought preconstruction within the last year are being hit hard because of the glut of inventory in the 905.”

Last year, the federal government increased its immigration quota by a third and now welcomes 300,000 newcomers. Stillman estimates 40% of them move to the GTA, and that doesn’t even account for migration from within the country.

“Suddenly you have 30,000 to 40,000 more units that are needed,” he said. “I’ve had a lot of clients who are new to Canada, but from the U.S.—I’ve done five of those deals in the last month—and they moved up to Canada for whatever reason, but they’re buying things. These are educated, skilled people making over $100,000 a year and they’re happy to put money down.”

The summer market in Toronto was better than most observers expected. While inventory in the city is low, units moved quickly.

“We’ve had a fantastic summer,” said Shawn Zigelstein, a realtor with Royal LePage Your Community Realty. “I’ve been talking with some other agents and they all had a really good summer because inventory levels are relatively low in the city. Once you get into the suburbs, a few pockets have a high amount of inventory, but in the City of Toronto there’s only two months’ worth of inventory.”

With files from The Canadian Press