Mortgage 101 – What Canada’s Economy Means for Homebuyers

Dan Ahlstrand and Clinton Wilkins discuss the current mortgage rate environment, emphasizing the importance of celebrating Pride Month.

Dan Ahlstrand
And welcome back to Mortgage 101. I’m Dan Ahlstrand, and he is Clinton Wilkins. That was an informative couple of segments, Clinton. And I think continuing to have months like Pride Month, so that we can celebrate the diversity of our community, is vitally important in these conditions in these days.

Clinton Wilkins
It’s so important, and I think it’s just talking about it, bringing awareness. We’re here to support the community, and the community is here to support us. I think that’s really great. And one thing that we really want to talk about before we wrap up the show is what’s going on in the rate environment. I think it’s one of these situations of expect the unexpected, where we’re really watching the bond yields every day. I watch it, I watch it, I listen, and the Bank of Canada is meeting next week on July 15. Right, so there’ll be a decision maybe by the time you’re even listening to this podcast. But I expect that we’re probably going to be still maintaining a plateau situation.

Dan Ahlstrand
Even when we saw some of those indicators, the GDP indicator a couple of weeks ago came out that Canada was no longer in recession and saw an increase in things that were doing better by percentage points.

Clinton Wilkins
We’re doing better than you expected. I think the one thing that we’re obviously still going to watch is GDP, job numbers, inflation, and what is going to happen with the oil situation. Is that going to restabilize? And I think there are a lot of signs that things are moving into a more stable environment now. So I, but that’s going to take several months to work out, and I think change. Could also go the other way. It could also go the other way, but this may take three to six months, I think, to renormalize.

Dan Ahlstrand
Experts tell me that if everything stays open in the Middle East, it’s going to take almost a year for the oil and gas industry to recover from this because of the strategic reserve that has been depleted, and it’ll take that long for the prices to return to where they were pre-Iran war.

Clinton Wilkins
And a lot can happen during six months, twelve months. So again, we’ll watch and see.

Dan Ahlstrand
For sure.

Clinton Wilkins
I think that if we continue to see inflation going up, if we continue to see GDP increasing, I’m not saying that we’re going to start getting into an inflationary environment. That’s not what I’m saying, but I think that we’ll stay at a plateau maybe longer, and I think things would need to go the other way for us to start seeing cuts. So I’m not saying there’s not going to be cuts, and I’m not saying there’s not going to be increases, but I think that we will cautiously assume that rates are going to be in a similar environment to what they are now. I think right now the variable is less. I think if you can stomach it, take the variable, even if we do see increases in the future, I’m not saying that we are, but let’s say it does happen. I think that we’ll be in a very similar cost situation between the variable and the fixed. The one nice thing about the variable, Dan, is that you have that flexibility. If you have to break the mortgage early, it’s only three months’ interest to get out, and you can always convert your variable rate mortgage into a fixed rate, no penalty. Especially, obviously, if you stay with the same lender. The other thing is, so many borrowers do break their mortgages. Maybe less today than they did maybe a couple of years ago. Typically, in a in a in a rate decreasing environment, we see more people break them. The rate is increasing. People really try to hold on to those low rates for as long as they can. But we’re seeing more and more borrowers try to stay and try to fulfill their,, their terms. People don’t want to pay penalties. That’s not great. Sometimes these penalties are several 1000s of dollars. So, if you can hold on through the term, that’s great. But don’t hold on just for the sake of holding on. I saw some clients this week that I’m doing a refinance for, and they’re like, “Oh, we don’t know if it’s going to make sense to pay the penalty.” I then start like working on the application. They have like $100,000 of unsecured debt. I’m like, “Honey, you’re paying this penalty in like two or three months on all this unsecured. Why didn’t you come to me earlier?” And they’re like, “Well, the rate on my mortgage was just so low.” I’m like, “Well, what about everything else that you’re paying?”

Dan Ahlstrand
And that’s why these constant conversations, and that’s why employing a mortgage broker is important. Because if you catch these things early enough, then it’s in the long run. To save you money.

Clinton Wilkins
I wish they would have called me a year ago, Dan. Honestly, like they literally threw away 10s of 1000s of dollars in interest on this unsecured debt, and I said to them, “But why didn’t you? And it wasn’t that they were ashamed.” I think that is the case for a lot of people. Like they they they don’t want to, we realize how dire the situation is. They were just so focused on, well, we have a very low rate on our mortgage. We want to get through this term. That wasn’t the best advice, though. I think if they would have talked to me a year prior, I probably they probably I don’t think their situation would be would have been as bad because I think they accrued more debt through the last 12 months, but I think we would have made different decisions together, and that’s why I think having an annual review, having a mortgage broker and a brokerage that wants to continue having a relationship with you, and I think that we lend our customers to the bank. Typically, these terms are three years or five years. We are lending it to that lender for that period of time, but we want to continue being involved, and I think borrowers-the ones that are getting the most value from our services-are the ones that do want to do the annual reviews. They’re getting mortgage monitoring from us, which we send out emails and let them know kind of what we think the property value is and what’s going on in the rate environment, and how much equity they have. The ones that are using these tools and engaging with us, I think those folks are getting the most value. As much as this is a transaction business, I think that we are in the relationship business. I don’t think that I am selling anything, Dan. I think I am providing advice, and I think this is a service business. Honestly, I do.

Dan Ahlstrand
And for people to come to see you, they need to get into the mortgage market, Clinton. And over the last several weeks, I, in my personal opinion, have been getting mixed messages from different organizations, realtors, and groups about what that market is like out there right now. You’re in this thing every day. Is it a buyer’s market? Is it a mixed market? Where are we, and what’s the outlook for somebody who wants to get into it?

Clinton Wilkins
I think we’re in a balanced market. I think these are shifting more towards a buyer’s market today, and I may even caveat that today we might be in a buyer’s market for those properties above a million dollars. And I’m seeing more and more of these listings coming up. And like what Megan said from the agency, there are nine months of inventory in that 1 million-plus-price point. So, if you want to buy a home at a million dollars plus, now might be a great time, and those properties might be on sale.

Dan Ahlstrand
Plus, that subcontract is coming in, and people are going to get into the market because they see the opportunity.

Clinton Wilkins
They see the opportunity, and guess what? If you have a couple of borrowers making, each,,00 grand a year or more, well, maybe a million-dollar property is the property that you’re in the market for, and again, I started doing this 20-plus years ago. There was an odd transaction we did a year ago that had a million-dollar value. Now it’s very common that we see million-dollar-plus properties. I see them every week, and that was not the norm back then. We got excited when we saw a property that was like 567, $800,000. We’re like, “Ooh, this is a big one!” Where a lot of these property values were two and 300,000. But we’ve changed, and, as much as these property values have gone up, I do feel for borrowers overall because incomes have not paced, and I think it is more challenging overall for people to have a share of their wallet because they’re strained on gas, they’re strained on groceries, they’re strained somewhat on mortgage interest rates. Although they have rebalanced and we’re in a more neutral rate environment now, the share of the wallet overall for Canadians is tough, and that’s why you really have to pick and choose. I think the priorities, and I think overall people need to focus on their needs, not their wants. This instant gratification culture, I think, is just so toxic. And I, when I see these borrowers that have this $100,000 of consumer debt, I’m not saying that that was because they were being irresponsible, but I think they were maybe focusing maybe more on their wants than they were on.

Dan Ahlstrand
And we talked about this in the last segment about people doing their research, and that’s important. And I certainly wouldn’t suggest that you don’t, but that’s only a part of the puzzle. Because yeah, sure, you might learn something, and yeah, maybe Grok or AI or whatever it is kicks out some information, or you go on the realtor sites, and you look at all these values of these homes, and you go a million dollars? I can’t afford a million dollars. Well, can you? And how can you if you don’t have a conversation with somebody like Clinton?

Clinton Wilkins
Well, I think that’s where it’s important. It’s like you need to have a pre-approval if you’re thinking that you want to get into the marketplace. Even if you don’t want to get into the market today, I think a pre-approval is a good place to start. Looking at your income, your assets, and your credit, you can make a plan. And I think knowing where you’re at is the most important place to start. And I think even today, like we do see people making offers on properties that have no business, honestly, making an offer. Those are, I think, few and far between. Realtors are, I think. Getting obviously more educated as well, and they want to know that these borrowers are going to be able to actually get mortgage financing. Most people who are buying a home get a mortgage, and you really, really have to start with a pre-approval. Otherwise, you might be upset. And we don’t. We want to be the happiness coordinators. I hate giving people bad news, and I always say that every Canadian can get a mortgage, but if your situation is more challenging, we’ll say maybe you need a bigger down payment, but maybe you don’t have those funds available to make that bigger down payment. So maybe I can get you a mortgage, but you don’t have enough money to make that conversation.

Dan Ahlstrand
Is an important part, right?

Clinton Wilkins
Absolutely, and I think being open and honest and giving all the details. Tell me where all the skeletons are buried. I want to know because then I can mitigate and I can work through it. And I think sometimes people want to keep their cards close to their chest, but if we don’t know, we can’t help.

Dan Ahlstrand
That’s going to do it, Clinton. Time flies when you’re having fun. This has been the July edition of Mortgage 101. Thanks for doing this, my friend. It’s been a bit cathartic. Give me a chance to get back up on the horse, and I look forward to doing it again soon.

Clinton Wilkins
I can’t wait to see what August and beyond look like. Your listeners, we’re going to be back. Who knows what the format’s going to be? But I’m so glad that we were able to do this July show. And I hope a lot of our listeners who were listening to us on the FM have found us here in other channels. And I hope in the future we’re going to have a new and improved format that maybe even more people are going to be able to hear. So thank you so much, Dan. I’m so glad that you’re willing to continue doing the show for me.

Dan Ahlstrand
I learned something, and that’s important.

Clinton Wilkins
We’re gonna we’re gonna keep this going.

Dan Ahlstrand
For sure. That’s gonna do it, folks. You’ll be listening to Mortgage 101. He’s Clinton Wilkins. I’m Dan Ahlstrand, and as I used to say, we’ll see you when we see you.