Green Mortgage TeamQuarterly Issue 08 September 2020

I S S U E 0 8 - S E PT EM B E R 2 02 0

THIS MONTH’S RATE UPDATES

by Green Mortgage Team

CANADA HAS RECOUPED TWO-THIRDS OF PANDEMIC JOB LOSSES

by Dr. Sherry Cooper

P OW E R E D BY

GREEN MORTGAGE TEAM Q UARTER LY

IN THIS ISSUE: GREENWEALTH CAPITAL Unbiased advice for taking your real estate investing to the next level INDUSTRY UPDATE COVID-19 causes real estate rally SAVE THOUSANDS IN INTEREST Ref inance your mortgage during COVID-19

POWERED BY

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IN THIS ISSUE Upcoming Events /

Kyle Green

Catch the Green Mortgage Team at these online events 04

Max Jurock

Owner General Manager

Industry Update / COVID-19 causes real estate rally 07 Greenwealth Capital / Unbiased advice for taking your real estate investing to the next level 08

Canada Has Recouped Two-Thirds of Pandemic Job Losses /

by Dr. Sherry Cooper 10

Molly Duncan Executive Assistant

Ami Arandi Commercial and Private Lending Underwriter

Michael Browne Account Manager

Robin MacDonald Account Manager

Gary Konrad

Diversifying in Uncertain Times /

by Christopher Lubell 13

Account Manager

Alex Gattey Jr. Account Manager

This Month’s Rate Updates /

by Green Mortgage Team 14

Jason Cattermole

Save Thousands in Interest /

Tasha McKenzie

Refinance your mortgage during COVID-19 16

Underwriter Underwriter

Quinn Berry Documents Manager

Book of the Month /

by Ami Arandi 19

Lisa Bridal Documents Manager

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UPCOMING EVENTS

CATCH THE GREEN MORTGAGE TEAM AT THESE UPCOMING ONLINE EVENTS: REAG VIRTUAL

Sept 14

OZZIE JUROCK’S REAL ESTATE LAND RUSH 2020

Sept 19

VANCOUVER REAL ESTATE SUMMIT

Oct 24

REIN SUMMIT

Nov 13 & 14

2020 CLIENT APPRECIATION EVENT Due to the health concerns surrounding the current pandemic, we will be unable to host our annual client appreciation event this year. We look forward to returning to our tradition in 2021!

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CONTEST ENTER TO WIN A $300 PREPAID VISA GIFT CARD Even though we will not get to see all of you at our Annual Client Appreciation Event, we want to show you how much we appreciate all of you!

It is time to go through your closet and find all of your favourite green clothing! Send us a photo of yourself wearing your “best” green outfit and you will be entered to win a $300 prepaid VISA gift card.

Bonus entries: Invite your family to join in! For each same-household family member in your photo, you will receive one entry per person in the photo.

Please submit your entries via email to info@greenmortgageteam.ca.

Contest closes September 30th at 5 PM. The winning entry will be chosen at random. Photos will not be posted online without participant’s consent.

GREENMORTGAGETEAM.CA

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Helping you navigate Commercial Lending Download our Commercial Lending guide here

PO WE RE D BY

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INDUSTRY UPDATE

COVID-19 CAUSES REAL ESTATE RALLY POWER ED BY

As many of you can relate, 2020 has been a wild ride.

As a business owner, my initial priorities were concern over the future, cutting non-essential expenses, and putting my team members first — which meant a commitment to doing everything necessary to keep everyone together.

Following that, our team tackled refinancing for our clients, taking advantage of discounted variable rates before they disappeared. This was a five day flurry that resulted in a huge number of mortgage submissions to lenders for refinancing.

By mid-May, those refinances were finally wrapping up, which was right around the time that the market started to rebound. And now we are in a seller’s market? Crazy.

When you take a step back, it is not as crazy as it seems. Vancouver in particular, but also Canada as a whole, has done a fairly good job of managing the effects of COVID-19. Layer on top of that a lot of pent up demand for housing and interest rates that have fallen over 1%, and you have a recipe for a hot market. Interest rates alone have a huge impact on affordability, as a 1% drop in rates on a $500,000 mortgage is an annual savings of $5,000 — a $25,000 discount over the commonly chosen 5-year term.

BY KYLE GREEN

Owner of the Green Mortgage Team Will this continue? I am cautiously optimistic. Although a lot of jobs have been lost, the vast majority of those were in the hospitality and the service industries.

Those typically lower wage workers are simply not in a position to afford housing, especially in more expensive markets like Vancouver and Toronto.

Interestingly, it seems like the detached market is currently the hottest market, with multiple offers and subject-free offers running rampant again (similar to 2015 and 2016). My opinion is that it would typically be your “white collar” buyer in these $1 million markets, and for the most part, white collar employment has seen little to no change. In fact, in many industries like technology, demand has only grown.

That said, I am still cautious, and recommend that you err on the side of caution as well. The second wave of COVID-19, if it happens, could be a deathblow to companies and individuals on the edge. It will be important to take this time to amass cash and make sure you have a solid safety net.

Be resilient, stay strong, and most importantly, stay safe.

GREENMORTGAGETEAM.CA

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Greenwealth Capital:

Unbiased advice for taking your real estate investing to the next level I am pleased to announce that my new real estate consulting company, Greenwealth Capital, finally launched in May of this year. I must say, starting a company from the ground up is a lot of work!

Now that we have launched, I can finally let the cat out of the bag and tell you more about this new endeavour. I created Greenwealth Capital to provide unbiased real investing advice and help investors successfully build their wealth through real estate. Here are some of the features of this new program: • Access to more lenders using our underwriting software that analyses options both inside and outside the broker channel, giving our clients access to more lending options.

• Create a 10-year vision roadmap to help you form your gameplan to achieve your financial goals using real estate.

• Portfolio analysis tools that track the current and projected performance of your portfolio. I spent a lot of time (and money) developing this tool. Finally, a tool that allows you to analyse your real estate portfolio the same way you analyse your stocks.

• Consultations with accountants and other professionals to determine how much you can save in taxes by restructuring your debt.

• Direct access to and communication with me to go over ideas, scenarios, properties, etc.

• Join the community and get access to potential joint venture partners and other investors.

If you would like to learn more about Greenwealth, feel free to check out our website at www.Greenwealthcapital.ca.

Sincerely, Kyle Green

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Unbiased real estate financing advice www.greenwealthcapital.ca

info@greenwealthcapital.ca | 604-499-8976 #780-789 West Pender, Vancouver, BC V6C 2X1

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BY DR. SHERRY COOPER Chief Economist, Dominion Lending Centres Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

STRONG AUGUST JOBS REPORT IN CANADA

Canada Has Recouped Two-Thirds of Pandemic Job Losses The August Labour Force Survey, released [this month]

by Statistics Canada, reflects labour market conditions as of the week of August 9 to 15, five months after the onset of the COVID-19 economic shutdown. By midAugust, public health restrictions had substantially eased across the country and more businesses and workplaces had re-opened.

Employment rebounded in August by 246,000 net new jobs, a slowdown from the 419,000 gain in July and June’s 953,000 rise. This slowdown was expected with the initial recovery boost from easing containment measures in the spring fading through the summer.

The great news is that 84% of the headline jobs gain in August was in full-time positions. This follows the surge in part-time jobs in July. Full-time employment stood at 93.9% of pre-pandemic levels in August, compared with 96.1% for part-time work. In the months prior to the COVID-19 economic shutdown, full-time employment had reached record highs, while growth in part-time work was relatively flat. Compared with 12 months earlier, full-time employment was down 5.4% in August, while part-time work decreased by 5.1%. And an elevated share of those working part-time is doing so despite preferring full-time work. Hours worked increased more than employment in August — but are still down more relative to pre-shock February levels (-8.6%) than the headline employment count (-5.7%).

The August job growth brought employment to within 1.1 million of its pre-COVID February level, thereby recouping two-thirds of all the lost jobs.

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The number of Canadians who were employed but worked less than half their usual hours for reasons likely related to COVID-19 fell by 259,000 (-14.6%) in August. Combined with declines in May, June and July, this left COVID-related absences from work at 713,000 (+88.3%) above February levels.

As of the week of August 9 to 15, the total number of Canadian workers affected by the COVID-19 economic shutdown stood at 1.8 million. In April, this number reached a peak of 5.5 million, including a 3.0 million drop in employment and a 2.5 million increase in COVID-related absences from work.

The number of Canadians working from home declined for the fourth consecutive month. In April, at the height of the COVID-19 economic shutdown, 3.4 million Canadians who worked their usual hours had adjusted to public health restrictions by beginning to work from home. This number has fallen each month since May when the gradual easing of public health restrictions began and reached 2.5 million in August.

Among Canadians who worked their usual hours in August, the total number working from home fell by nearly 300,000 compared with July, while the number working at locations other than home increased by almost 400,000.

THE JOBLESS RATE CONTINUED TO FALL IN AUGUST The unemployment rate fell 0.7 percentage points to 10.2% in August. As a result of the COVID-19 economic shutdown, the unemployment rate had surged from 5.6% in February to a record high of 13.7% in May. By way of comparison, during the 2008/2009 recession, the unemployment rate rose from 6.2% in October 2008 and reached a peak of 8.7% in June 2009. It took approximately nine years before it returned to its pre-recession rate.

The unemployment rate fell most sharply in August among core-aged women aged 25 to 54 years old, down 1.2 percentage points to 7.5%, the lowest unemployment rate among all major groups. This decline was largely due to employment increases, as overall labour force participation was unchanged from July. The unemployment rate for core-aged men fell 0.7 percentage points to 8.1%, also the result of increased employment, with little change in their labour market participation.

Employment gains in the services sector continued to outpace that of the goods-producing sector.

Employment growth in the services sector was driven by gains in educational services, accommodation and food services and the “other services” industry. In the

goods sector, gains in manufacturing were partially offset by declines in natural resources.

Accommodation and food services as well as retail trade were among the industries hardest hit by the initial COVID-19 economic shutdown. By April, employment had fallen to half (-50.0%) of its prepandemic level in accommodation and food services and to 77.1% of its pre-COVID-19 level in retail trade.

Starting in May, employment rebounded in both sectors as many provinces began reopening their economy.

Employment growth in accommodation and food services rose by 18.4% per month on average from May to July. In August, however, the pace of growth in the industry slowed to 5.3% (+49,000). Despite these recent gains, employment in accommodation and food services was at 78.9% of its February level.

August marked the fifth full month of international travel restrictions, which continues to affect industries with strong ties to tourism.

The number of people employed in retail trade edged up 0.7% (+14,000) in August, following average monthly increases of 6.3% over the previous three months. Employment in retail trade reached 93.4% of its pre-COVID-19 level but fell just below the rate of recovery for total employment (94.3%).

While employment remained below pre-COVID-19 levels, retail sales in June were higher than in February and are expected to continue to rise in July, based on preliminary estimates. This highlights potential structural changes within the industry as employers have been able to increase their sales despite a smaller workforce.

Employment Increased in Most Provinces in August–Led by Ontario and Quebec Employment in Ontario rose by 142,000 in August (+2.0%), nearly all in full-time work, while the unemployment rate fell by 0.7 percentage points to 10.6%. Combined with the employment increases in June and July (+529,000), the gains in August brought employment in Ontario to within 93.6% of its pre-pandemic level.

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In the census metro area (CMA) of Toronto, employment increased by 121,000 (+3.8%), nearly double the growth rate of the province, and reached 93.3% of its pre-pandemic level.

In Quebec, employment increased by 54,000 (+1.3%) in August, building on gains of 576,000 over the previous three months, and bringing employment in the province to within 95.7% of its pre-COVID level.

In the Montréal CMA, employment grew by 38,000 (+1.8%) in August and reached 96.0% of its prepandemic level.

Employment rose in most Western provinces in August.

British Columbia reported the largest increase, up 15,000 (+0.6%). Employment reached 94.1% of its February level and the unemployment rate fell 0.4 percentage points to 10.7%.

While employment in Alberta was little changed, the unemployment rate declined by a full percentage point to 11.8% as fewer people looked for work.

In Atlantic Canada, Nova Scotia had the largest employment gain in August, up 7,200 (+1.6%), mostly in part-time work. The unemployment rate was little changed at 10.3%, as more Nova Scotians participated in the labour market. After notable increases in May and June, employment in New Brunswick held steady for the second consecutive month.

BOTTOM LINE This was still a relatively strong employment report even though job gains have slowed. Canada’s employment recovery has outpaced the US, recouping two-thirds

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of the lost jobs compared to only a 50% gain south of the border. The hardest-hit has been both lowwage workers and youth, which helps to explain why housing activity has been so strong. Low-wage employees and youth are typically not homebuyers or sellers. Moreover, consumer spending in Canada has solidified very near to pre-COVID levels. Spending on entertainment, dining and self-care has risen recently as more businesses open up and is now approaching year-ago levels. Total credit or debit card spending is up about 5% relative to the same time last year.

Canadians are venturing out more around their home towns, but not going much further.

According to RBC: • “While online spending remained prevalent in some areas (e.g., groceries), in-person transactions continued to recover.

• Spending indicates Canadians were comfortable going out to dinner, even if to a patio. Restaurant spending was buoyed by Canadians seeking inperson dining experiences and was down just over 4% from last year’s level.

• The share of online transactions at restaurants decreased to 17% from one-third at its post-crisis peak.

• Health and self-care spending increased through mid-August, as gym reopening’s led to an uptick in fitness spending.

• Entertainment spending picked up further into August and was down 10% relative to last year.

• Spending was supported by still-strong spending on golf and to a lesser degree digital goods.

• More recently, Canadians began spending again on professional sports, lotteries, hobbies, and local attractions.”

Recent data from the local real estate boards in Toronto and Vancouver showed strong sales activity and significant further upward pressure on prices. The CREA data for the whole country will be out on the 15th of September. This adjusts the price data for types of homes sold, giving us a better idea of how significant price pressures have been.

Diversifying in Uncertain Times • Liquid – you can access your investment by several different means, some of which are taxfree; • Increased flexibility – some Par Whole Life Policies have been re-designed to afford a measure of deposit flexibility not previously available; • This investment could be protected against the claims of creditors or litigants; • If you became disabled, your annual investment amount could be made on your behalf and never have to be repaid.

Uncertain about where to invest during COVID-19? It may be time to diversify through a Participating Whole Life policy.

The COVID-19 pandemic combined with global social unrest have led to an era of unprecedented uncertainty, contributing to global economic concerns and stock market volatility. Potential economic fallouts stemming from disputes between China with both Canada and the United States, along with a new recession looming just over the horizon, have left many wondering if their investments are robust enough to withstand the turbulence of the current times and any future instability.

Diversifying your assets through a Participating Whole Life policy may be key to ensure future financial security for you and your children. The new generation of Par Whole Life policies is now viewed as a separate asset class due to their stable returns. It’s important to understand that the new features of Participating Whole Life policies are not those of our parents’ generation. The new version of these policies includes the following: • A stable rate of return, consistent with or better than fixed income or bond-type investments of similar duration; • A guaranteed investment designed to increase in value every year, meaning your investment will not decline due to market conditions;

In addition to being a viable option for investment diversification, a Participating Whole Life policy would also ensure that your family is protected from the uncertainty of death. With the re-investing of policy dividends, this type of policy is guaranteed to increase in death benefit each year.

Reach out if you are unsure where to put additional investment funds or if your investments are keeping you up at night due to these unprecedented times. As always, please feel free to share this information with anyone you think would find it of interest.

BY CHRISTOPHER LUBELL President Lions Peak Financial Group

lionspeakfg.ca

• Tax-advantaged – your investment grows taxdeferred, possibly even tax-free; GREENMORTGAGETEAM.CA

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THIS MONTH’S RATE UPDATES for their mortgage penalties. You can read more about the calculation of mortgage penalties here.

Fixed Rates

Due to the potential Interest Rate Differential (IRD) penalties that may apply, we are warning our clients that if you take a long-term fixed rate mortgage, you need to be very sure that you will not be breaking your mortgage before the term is up.

DROPPING

INCREASING

It was quite a bumpy ride for rates in the past two months. Fixed rates dropped in early March, and then rebounded quickly from their lows only about a week later. The spreads over bonds jumped up due to liquidity issues in the market, as well as, a higher risk premium being associated with lending.

Since then, the spread has been normalizing as we predicted in our May issue, and we are now at or very close to the bottom of the range for fixed rates.

Bonds have been hovering around 0.4% for the past five months, and a normal spread is 1.5%1.8% above bonds. With insured mortgages available below 2% and conventional mortgages just over 2%, we are now inside of this range.

It is very important to understand how fixed rate penalties have increased due to the drop in rates.

The penalty calculation is based on the difference between your rate and the current market rates.

Since that spread has increased, so too will your mortgage penalty. We have been running scenarios on mortgage penalties and the cost of most penalties are between 500%-600% (in some cases 1000%) more expensive than the 3-month interest penalty of taking a variable rate. For instance, a $500,000 mortgage may have a penalty of $19,350 instead of a 3-month interest penalty of approximately $2,487.

One way to mitigate this risk is to go with a “nonbank” lender who has a much fairer calculation

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Variable Rates

DROPPING

Lock-In Metre

INCREASING

Since COVID-19 hit, the Bank of Canada made immediate changes and dropped rates 1.5% over three different drops. This is the biggest change we have seen over such a short period of time since the subprime crisis in 2008.

TIME TO LOCK-IN

DO NOT LOCK-IN

This metre has seen a complete flip-flop from our last issue in May. At the time, we recommended not locking in and staying the course to ride the wave down. If you have followed this advice, it has probably saved you thousands.

Currently, it seems like we are very close to or are at the bottom for fixed rate pricing, unless bond yields suddenly go down further (which is possible, but at 0.4%, it is unlikely).

For those of you who are in a variable rate for the intention of locking into a low fixed rate mortgage, it is time to start seriously considering locking in.

The US government is signaling that there is a high likelihood that they will maintain these low rates through 2023. Anyone currently in a variable rate right should be able to enjoy their low rate for about 2-2.5 years. It is unlikely that the Bank of Canada will make any adjustments downward at this point either, as this would bring their monetary rate from 0.25% to 0%, effectively putting Canada into negative interest rate territory. It seems that North American governments are unlikely to go there unless things continue to go sideways.

That said, it is very important that you consider the impacts of being in a fixed rate mortgage in case you break it early and pay an IRD penalty (as we mentioned on the previous page).

Since COVID-19 hit and variable discounts completely disappeared, volatility has been slowly settling down and variable discounts have been slowly getting better. They are not quite at the level seen preCOVID-19, but we would not be surprised if we start seeing Prime -0.6% again before the end of the year.

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Save Thousands in Interest by Ref inancing Your Mortgage During COVID-19

by Green Mortgage Team

What does COVID-19 have to do with interest rates?

Despite the substantial negative impact of COVID-19 across many industries, the virus has had a positive impact on mortgages, specifically for people getting a new mortgage today and for people that were in an existing variable rate mortgage. In general, when bad things are happening around the world, this tends to push interest rates down.

Events such as 9/11, the credit crisis of 2008, Brexit and COVID-19 are all examples of situations in which interest rates subsequently fell 1% or more over a short period of time.

During trying times, money usually will flock to safety. Canada is a safe country to park money, and bonds are a safe asset class. Fixed mortgage rates are tied to bond yields, which means when bonds fall, fixed rates fall (to learn more about why this is, you can read another blog post here). For variable rates, the Bank of Canada dropped a full 1.5% over a short period of time to stem the bleeding and is in a position where they cannot reasonably go any lower without venturing into negative territory.

What is happening with rates?

After dropping in March and then spiking back up as spreads over top of the bond yield increased due to the COVID-19 “risk premium�, rates have been steadily falling since then and opportunity is brewing. With low interest rates, it makes more and more sense to break an existing mortgage and pay the penalty to take advantage of getting a new lower rate today.

Our clients are refinancing not only because they may save money over the remainder of their current term, but because now they will have a new mortgage for, say, five years instead of renewing in a year or two when rates could be higher at the time.

We believe we are very close to the bottom of the market. Typically interest rates are priced at bonds + 1.5%-1.8%. Currently bonds are hovering around 0.4%, which means fixed rates should be closer to 1.9%2.2%, but currently most banks are closer to 2.49% for a 5-year fixed, or lower for an insured mortgage. The COVID-19 spreads are decreasing and we expect this will get closer to its normal spread band very soon.

Following this, we will either see rates flatten out or begin to increase as we recover through the pandemic.

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How do you know if it makes sense to break the mortgage?

Let’s say that you have a $500,000 mortgage with two years left on the mortgage, at a rate of 3.5% interest.

The first step is to establish what the penalty to break that mortgage is. Do not worry, we will do the math and estimate this for you. If you would like to learn more about how the banks calculate the penalties, you can read more here.

We will then evaluate the amount of savings over the remainder of the term. In an ideal circumstance, the savings will exceed the penalty over the remainder of the term up until your maturity date. One important item that is often forgotten is that if you take a new 5-year term, you will not be coming up for a renewal in two years time, you will instead renew in five years.

If you kept your current mortgage you would have to renew in two years, and rates are unlikely to be as low as the rate we can get at the present moment during this pandemic. As a reference, we encourage you to view the bond yield chart here (select 1W or 1M to go back further into history). You will find that over the past ten years, bonds have never been this low.

What is the game plan?

Put yourself in the best position possible to take advantage of a refinance.

Should you go variable or fixed?

There is a lot that goes into making the decision of going variable or fixed. However, with the discounts off of posted rates being so great, it will cost anyone who breaks their 5-year fixed rate mortgage before the maturity dearly. In our analysis, the penalties to break a 5-year fixed mortgage early are anywhere from 500%-1,000% more than if you break a variable mortgage (where the penalty is capped at three months interest). To learn more about whether you should choose a fixed rate or a variable rate, you can read more here.

Example

We recommend that you have your file prepared and ready for the point when rates hit bottom and then start rising. This will allow us to hold a rate for up to 120 days and see where rates go from there. If rates continue to go up, it will make more and more sense to pull the trigger and refinance. Moreover, rates going up will then shrink the spread on the penalty cost for the IRD (Interest Rate Differential) penalties for fixed rate mortgages.

Let’s use some figures to illustrate this. We will use the example of a $500,000 mortgage at an interest rate of 3.5% today, with two years left on the mortgage, compared to a new refinance at 2.29%. The mortgage penalty is added to the outstanding balance of the new mortgage, which means there are no out of pocket costs.

Some of our clients have decided to break their mortgage and pay a $10,000 penalty, but will save over $30,000 over the term of their mortgage.

In order to be able to hold these rates, we will need a fully built file, including supporting documents, to get the approval.

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First, here is a look at the annual interest costs. This is assuming that interest rates in two years, when the renewal has come up, has normalized at 3.2%.

In most cases, the payments can be lower if you prefer a lower payment. If we keep the payments the same as the current mortgage, we can see that although the mortgage balance starts off higher due to adding the penalty to the outstanding balance, the mortgage outstanding balance after five years is $8,500 lower.

This means that in this example, the borrower would be ahead by $8,500 over five years by refinancing.

How can you prepare to take advantage of this opportunity?

Our team will be happy to help get this process started for you. We will need to collect the necessary information and documents to build your file, so that once we hit the low point with rates, we can send your application to the lender.

To prepare yourself for this opportunity, contact us at Info@GreenMortgageTeam.ca or 604-229-5515.

Another way to visualize this is to look at the total accumulation of interest over five years.

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BOOK OF THE MONTH

by Ami Arandi

Lessons from a Third Grade Dropout

by Rick Rigsby Ph.D I was originally intrigued by author Rick Rigsby when I watched a video of him speaking about his father. I immediately bought a copy of his book, Lessons from a Third Grade Dropout. This book is both quick to read and inspirational, containing many great and simple life lessons. I found myself constantly stopping to reflect on myself and my life as I read this book.

Exercising a common sense approach, Rigsby motivates the reader to be a better person and strive to make a difference in the world. He achieves this by telling the story of his father, a third grade dropout, who manifested character, integrity and decency. Rigsby highlights the wisdom of his father’s generation, which he claims has been lost in later generations. My top three takeaways from this book are:

Available on Amazon and Indigo

1: You are what you repeatedly do. Therefore, excellence ought to be a habit, not an act.

2: Discipline: Always arrive early.

3: We all seem to have more, but we help less.

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STAY CONNECTED

GreenMortgageTeam.ca info@greenmortgageteam.ca #780-789 West Pender Street Vancouver, BC 604-229-5515