29 Apr

RESIDENTIAL MARKET UPDATE 

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

Home prices have some support despite sales slowdown – RBC Economics

The national market can still provide some impetus for home price growth despite declining sales, according to Royal Bank of Canada Senior Economist Robert Hogue.

“Prices are determined by both demand and supply. What we saw in March is that supply came down quite a bit as well,” Hogue said in the April 15 edition of the 10 Minute-Take podcast by RBC Economics. “Sellers in this kind of turbulent environment have decided to wait it out, or maybe they have changed their minds, because they might not get the full value of their property under these conditions.”

Robustness as a fundamental feature of the housing sector was also observed by Royal LePage. Hogue said that while the market couldn’t conduct business as usual due to the pandemic, there were still some notable bright spots.

“In markets like Toronto and Montreal, for instance, prices continued to accelerate relative to February,” Hogue said. “Now, we don’t think that markets will necessarily sustain that kind of acceleration, but nonetheless, the point is that there is still quite a bit of support for prices despite plummeting activity.”

However, Hogue warned that both Toronto and Vancouver might see steeper market declines in April, and that the long-term value of Canada’s homes will depend heavily on the duration of the slowdown.

“Our assumption is that the economy starts to open up again sometime in June. Prices are probably going to stay relatively flat in most cases.” Hogue said. “If lockdown measures and the recession last longer than expected, downward pressure on prices are going to build up across the board.”  By Ephraim Vecina. 

Residential Market Commentary – March madness

The national home sales numbers for March have been delivered by the Canadian Real Estate Association.  As expected, they show the promising start to this year’s spring buying season has come to an abrupt end.

Earlier CREA released sales figures for Toronto and Vancouver, the country’s biggest and busiest markets.  They showed those cities going into a tailspin in the second half of the month.  Nationally, the market followed suit.

Here is a quick look at the country’s biggest markets:
Greater Toronto Area: -28%
Montreal: -13.3%
Greater Vancouver: -2.9%
Calgary: -26.3%
Edmonton: -13.2%
Winnipeg: -7.3%
Hamilton-Burlington: -24.9%
Ottawa: -7.95%

CREA’s early numbers for April suggest more of the same.  Prices, though, are standing pat.

Generally, market watchers believe prices are holding steady because of a significant drop in new listings.  They were down 12.5% in March, compared to February.  The MLS Home Price Index rose 0.8% m/m and is up almost 7.0% compared to a year ago.  These are early statistics and April’s final results will likely give a better indication of what is in store.

Analysts will also be watching the bankruptcy and default numbers.  Increasing levels of unemployment and income loss, due to COVID-19 measures, could push debt laden households over the edge, forcing them to put their homes on the market.  Any surge in that kind of activity could well lead to price declines.  By First National Financial. 

Reduced purchasing power more apparent in Canada’s largest markets

Unemployment has a disproportionate impact on the country’s largest housing markets, according to new Statistics Canada figures.

Across Canada, the employment sector declined by 5.3% from February to March, representing more than 1 million lost jobs. The unemployment rate rose to 7.8%, spurred by a record high 2.2% monthly increase.

Of particular concern is the sharp drop in employment in the private sector (down 6.7%), which was at a rate nearly double that of the public sector (down 3.7%).

“Unemployment increased by 413,000 (+36.4%), largely due to temporary layoffs,” Statistics Canada said. “In addition, the number of Canadians who had worked recently and wanted to work, but did not meet the official definition of unemployed, increased by 193,000.”

The agency’s March figures also indicated that unemployment rates in Toronto, Vancouver, and Montreal have experienced rapid increases last month.

The trend is compounding the already severe socio-economic effects of the COVID-19 pandemic, according to real estate information portal Better Dwelling.

Toronto’s unemployment rate stood at 7.8% as of March, having grown 11.42% annually. Meanwhile, Vancouver saw its share of unemployed workers shoot up by 68.89% year-over-year to reach 7.6% – a sharp about-face from the numbers traditionally associated with the city’s robust labour sector.

Of the top housing markets, Montreal suffered the highest unemployment rate last month, increasing by 51.67% annually to end up at 9.1%.  By Ephraim Vecina. 

First-time homebuyers suffering massive job losses during pandemic: Altus

Canadians in the typical first-time homebuyer age range were hit with full-time job losses that neared 200,000 in March when compared to employment levels just a month prior.

Real estate consultancy Altus Group used recent figures from Statistics Canada’s Labour Force Survey and its own internal data to assess the impact that the COVID-19 pandemic may have on future homebuying activity in Canada.

First, Altus Group mined its own recent data on first-time homebuyer demographics across the country. It found that Canadians between the ages of 25 and 44 made up 84 percent of first-time homebuyers over the last two years according to Altus Group data. The narrower 25 to 34-year-old segment made up the majority, with 64 percent of first-time homebuyers falling into this age range.

The firm then reviewed Statistics Canada’s preliminary data on job losses that came as a result of COVID-19’s spread across the country. It observed that 108,000 full-time jobs were lost in the 25 to 34-year-old range while 77,000 were lost in the 35 to 44-year-old range. Of course, losses were felt across all age ranges, with under-24s seeing the largest percentage decline when compared to the previous month and the 45 to 54-year-old age group rivalling the total job losses seen in the 25 to 34-year-old range.

That being said, potential first-time homebuyers are likely to be more adversely affected by job loss when it comes to their future ability to purchase a home. Older groups typically have more savings and a previously purchased property to leverage, while younger groups have yet to enter their prime homebuying years. Potential first-time buyers in the 25 to 44-year-old range — especially those at the younger end of the spectrum — are counting on this time to save for a downpayment and enter the market.

“These job loss patterns could have implications not just for absolute housing demand levels going forward, but also the relative mix of demand between the various segments (for example, first-time buyer, move-up buyer, move-down/lifestyle and “younger” senior segments),” wrote Altus Group in a post titled ‘Massive job losses among key potential first-time homebuyer age groups’ that was published recently on its website.  By Sean Mackay.

‘Buyer’s market’ for renters may change the rules for Canada’s residential real estate: Don Pittis | CBC News

There is nothing so bad that it does not end up helping someone is the old saying, and while the COVID-19 outbreak is bad for pretty well everyone, long-suffering renters may finally get a break.

Newly unemployed gig workers and real estate investors will be collateral damage, but experts in the property market are already observing what may be an inflection point in a trend where rents have gobbled up an increasing share of young workers’ incomes.

Already, there are early signs that while the supply of rental properties continues to grow, demand has slumped, even in Canada’s hottest property markets, such as Vancouver and Toronto. And while the demand for housing will likely eventually resume its climb, there are reasons to expect the decline in rental prices will outlast the immediate economic effects of the coronavirus.

That’s partly because the market was already showing signs of strain and was due for a readjustment. Like other sectors of Canadian real estate, the sudden economic downturn will expose faults in a rental market dependent on high levels of borrowed money.

‘Swimming naked’

The quote from world-famous investor Warren Buffet that “only when the tide goes out do you see who is swimming naked” may turn out to apply in this case.

A report on Friday from property analysts Urbanation showed that while the 2020 rental market started the year strong, there were already early signs of a slowdown in rental price increases. But with the arrival of COVID-19, that slowdown transformed into an absolute rental price dip.

“As demand fell faster than supply in the second half of March, rents experienced a slight decline,” said the report. “The average monthly rent in the post-COVID-19 period decreased 0.7 per cent year-over-year.”

Rental-focused construction is at a 50-year high, and while demand is falling sharply amid the outbreak, once started, projects are hard to stop.

People like Hilliard MacBeth, long-time financial analyst and author of When the Bubble Bursts, have repeatedly warned that the over-leveraged Canadian property market was merely waiting for something to prick it with dangerous results for the whole economy. The Bank of Canada has said stress testing has shown Canada’s financial system can take the heat.

Nonetheless, a report last week by business news service Bloomberg that Canadian property “once safer than gold” is heading for a reckoning was widely retweeted and sent shivers through the real estate sector.

And it is clear that not just ordinary Canadians up to their eyes in debt from a mortgage on their own home are suffering. Banks have also been deferring the mortgage payments of rental property owners, prompting objections from those who blame short-term rentals, in particular, for soaring house prices and rents.

“Should someone with four properties really be granted financial assistance?” Steve Saretsky, a Vancouver real estate agent asked in the Bloomberg report.

There are plenty of signs that a plunge in tourism has already upset the shortest of rentals of the type offered by Airbnb hosts. And mortgage deferrals are not free money if the banks continue to charge interest on the amounts landlords invested in hope of earning a profit.

Good for renters, not for landlords

But one well-respected adviser to the private sector property market has warned that pain for landlords is not over.

“All this is going to hit the rental market first,” says Ben Rabidoux, who runs North Cove Advisors, an information service for the professional residential real estate market. Of course, a warning to landlords of falling rents will be good news for renters.

In one respect, Rabidoux is far less gloomy than some about the home resale market overall, saying defaults remain unlikely so long as the economic meltdown caused by COVID-19 is less than six months.

But the real estate insider says there are strong signals that just as the supply of rental properties is hitting a peak, the number of people wanting to rent is falling.

The devastated Airbnb market, down about 95 per cent, is only part of it. Unemployed gig workers and students are moving in with relatives. Immigration has slowed to a trickle.

And Rabidoux’s research shows that the influx of non-permanent residents, including foreign students and people on work permits to fill gaps in Canada’s tight labour market, both of whom depend on the rental market and normally about 200,000-strong, has gone into reverse.

“We have a 50-year high in rental units under construction and a 50-year high in completions of those rental units coming online,” says Rabidoux. That’s over and above the current flood of condos built to sell to Canadians as rental investment properties. And once underway, he says, those projects will continue to inundate the market over a two-year timeline.

While people who have bought homes to live in them will be less affected, falling rental prices will inevitably impact other parts of the market, convincing some to rent rather than buy, said Rabidoux.

“You’re going to see it bleed into the resale market three, six, nine months down the road,” he said.

But for anyone renting, maybe now is the time to start shopping around.  By Don Pittis. 

COVID-19 creating legal issues for sellers

With just over a week until rent cheques are due, the blizzard of rent and mortgage deferrals that hit the Canadian housing market on April 1 is expected to blow in once again.

While most landlords at this point have come to some understanding with their tenants regarding late or adjusted rent payments, RealEstateLawyers.ca senior partner Mark Weisleder says there is no shortage of other issues his clients are still coming to grips with when it comes to selling their homes.

“It’s tough for everybody,” Weisleder says.

One question Weisleder has been repeatedly asked involves what to do when a sold property’s rental occupants express an unwillingness to vacate, ostensibly because of the restrictions COVID-19 has placed on their ability to either work or locate a new place to live.

Multiple sellers approached their tenants in February with 60-day notices to vacate, which allows them to stay in place until the end of April while giving the property’s new owners until May to take possession. But with the 60-day period now elapsed and the world stumbling collectively through an economic concussion many of these tenants are choosing not to leave.

According to Weisleder, sellers in this predicament have few options.

“You can’t evict them because the Board is closed down,” he says, estimating that the backlog of cases due to clog up Ontario’s Landlord Tenant Board could last up to a year. “You have to work something out. Work with the tenant – maybe find them another place to live – otherwise you’re going to have to extend your deal. Or maybe pay the buyer an incentive to just assume the tenant for as long as it takes.”

Weisleder says there have also been cases where buyers have been refused access to their new properties by the current rental tenants, even though the seller has agreed in writing to allow them into the property.

“They have the right,” he says of the tenants. “It’s safety.”

With 44% of Canadian households reporting some form of work disruption, there will inevitably be a number of potential buyers forced to abandon their plans mid-deal. The consequences could be dire for any buyers who agreed to purchase a property only to see their finances go up in smoke weeks later.

Weisleder points to the instant dip the Ontario market experienced following the 2017 Fair Housing Plan as a parallel. Prices and appraised values plummeted, forcing a rash of buyers, whose financing plans fell apart, to back out of deals to which they had already agreed.

He recalls a specific case where a set of buyers had put down a $50,000 deposit on a property only to walk away from the deal because of an inability to get the purchase financed. The sellers wound up selling the home for $500,000 less than what had been agreed to. After being taken to court, the buyers were ordered to make up the difference and pay the sellers the full $500,000.

Regardless of the excuse, whether it be sickness or quarantine or an inability to access capital, buyers cannot walk away after they have agreed to purchase a property.

“If they don’t close and a settlement is not reached, the seller can sue them,” Weisleder says.

But there are similar cases when legal action may not be the proper play for sellers. If a first-time buyer puts down five percent but ultimately walks away from a deal because of a lack of funds, the option to sue exists, but Weisleder questions the value such a step would have for the seller, who would be accruing $30,000-40,000 in legal fees for the privilege of suing someone who has no money.

He suggests that sellers in this case may be better off negotiating further with their buyers, possibly agreeing to the smallest price reduction possible that would still allow them to secure financing.

“For a seller, with these buyers, that’s a good deal,” he says.

The high number of calls Weisleder is fielding should provide comfort for anyone watching the Ontario housing space. The high volume of requests for assistance illustrates just how alive the market was prior to the arrival of COVID-19.

“Most deals,” Weisleder reminds us, “are closing.”  By Clayton Jarvis. 

Real Estate Services COVID-19 legal update on support services

REALTORS® services were deemed essential by the Province. But it’s not business as usual. Real estate was deemed essential so Realtors could continue to serve clients who were closing transactions or who urgently needed to sell or buy property.

On that note, we have received many questions about whether or not the essential business designation extends to include photographers, videographers, stagers, cleaners and home inspectors.

To help guide our Members during this incredibly challenging time, OREA has obtained a legal opinion on whether photographers, videographers, stagers and cleaners (referred to as “Service Providers” in this email) can provide services to REALTORS® given that Ontario has ordered all places of business to close, except those on the ‘Essential Business’ list (referred to as the “Order”).

Home Inspectors have received their own legal opinion and the Ontario Association of Home Inspectors has advised that “OAHI’s corporate counsel has confirmed home inspections are still essential ‘in the context of a real estate transaction process…’” during the State of Emergency.  Their letter can be found here.

Here’s what you need to know:

Yes, Service Providers such as photographers, videographers, stagers and cleaners may generally be able to do what they need to do at the Seller’s home in support of a real estate transaction.

Service Providers would fall within the “Essential Business” category of Supply Chain businesses that supply another Essential Business, namely the real estate agent services.  However, at least the following steps are required:

  1. The REALTOR® (and not their client) contracts with and retains the Service Provider’s services;
  2. Especially in the case of videographers, cleaners and stagers, the REALTOR® has appropriately contracted with their client to provide the client with those services;
  3. Only people absolutely necessary attend; and
  4. All other Emergency Orders and laws are followed (e.g. no more than 5 persons on the property etc.) including local public health authority guidelines.

This is based upon Ontario’s Emergency Orders in place April 9, 2020. As the COVID-19 situation is constantly changing, please note that the rules can change at any time.

Most importantly, because the condition and characteristics of the property, the market and the specific contracts a REALTOR® may have with both the Service Provider and their client are unique and the behaviour of both the Service Provider and REALTOR® are also contributing factors, this document can only act as a ‘general guide’. An absolute answer requires consideration of all of these factors on a case-by-case basis.

Finally, the responsibility rests with the Service Providers to comply with any Emergency Orders and the law when providing their services. A REALTOR® should not instruct the Service Provider to do anything a Service Provider does not consider to be legal.

For more information please see a summary of the detailed analysis here.  By Sean Morrison, President, Ontario Real Estate Association.

Economic Highlights

Residential Market Commentary – Crumbling confidence

The latest consumer confidence numbers from the Conference Board of Canada are another dull spot on an already gloomy outlook.

The April survey by the policy think-tank suggests the future outlook of debt-laden Canadians is at an all-time low and the plunge happened at a record pace – 73 points in just two months.  By comparison, the financial collapse of 2008 also saw a 73-point drop, but that took 13 months.

The Conference Board survey indicates 36.1% of respondents expect to see their finances deteriorate over the next six months.  That is 14 percentage points higher than the previous record of 22.1%.  The survey also suggests a majority of Canadians have a grim view of future employment with 53% of respondents saying they expect their job prospects to get worse over the next six months.

This pessimism is affecting spending plans, at least in the near term.  More than three-quarters of those surveyed, 76.5%, say this is a bad time to make a major purchase like a vehicle or a home.  That is more than 20 percentage points higher than the previous record, posted in February, 2016.

The Conference Board’s readings seem to be confirmed by government figures that show a sharp drop in inflation, a spike in unemployment and a jump in insolvencies.  Nationally, filings for personal and business bankruptcies and proposals rose 9% in February, compared to a year earlier – even before the coronavirus pandemic really took hold.  (Consumer filings led the way with a 9.2% increase.  Business filings were up 1.9%.). By First National Financial. 

Head of CFIB: “Tens of thousands” of businesses will close in wake of COVID-19

In recent comments to Bloomberg, Canadian Federation of Independent Business president Dan Kelly predicted the damage done to the economy by measures to slow the COVID-19 pandemic will spell the end for an obscene number of businesses.

Kelly said on Wednesday that, even with the assistance provided by government support programs, he sees “no scenario under which there are not tens of thousands of permanent business closures.”

It’s an alarming projection, but according to BMO chief economist Doug Porter, Kelly’s estimate is reasonable.

“Those numbers seem quite realistic,” Porter told MBN in an email. “I would point out that in a typical year, there are often as many as 140,000 new businesses created in Canada and almost that many that “exit” every year. That is by no means to downplay the figure, and there will no doubt be plenty of hardships among small businesses.”

A series of weekly surveys conducted by the CFIB illustrates growing anxiety among the Federation’s members. The most recent data show that 80% of businesses are either partially or fully closed because of COVID-19, an increase of approximately 27% over the past four weeks.

That lack of business has left a gaping hole where revenues should be. The CFIB survey found that 55% of respondents have experienced a decrease in gross sales revenue of at least 50% since the outbreak of COVID-19. As of April 16, the average amount the extended disruptions have cost respondents was $203,461.

(Interestingly, 44% of respondents said they are unsure if their businesses will survive if current conditions are kept in place until the end of May, yet only 36% have tried to apply for the Canada Emergency Business Account.)

Just how many of these impacted businesses wind up going broke remains to be seen. But if Kelly’s prediction is even marginally accurate, it will mean fewer businesses turning to lenders for funding.

“As far as the lending space is concerned, certainly loan losses will rise,” says DLC’s Dr. Sherry Cooper, who stresses the uncertainty of the current situation. “Banks and other lenders are already increasing reserves for these losses. How much these losses will be depends on how long this lasts.”  By Clayton Jarvis. 

Debt, unemployment compounding market threat of COVID-19

Mounting household debt and unemployment risk are likely to have a dangerous domino effect on the national market, according to a senior bank official.

“I think it’s been really tough on people, not just financially but mentally – there’s just so much stress in the system,” said Laura Dottori-Attanasio, head of domestic banking at Canadian Imperial Bank of Commerce. “That stress will continue to build until we get a little more clarity about what happens next and when it happens.”

“We do have a highly indebted Canadian consumer that we’ve been talking about for quite some time, and just under half of Canadians live paycheque to paycheque,” Dottori-Attanasio told BNN Bloomberg.

A recent report by the federal government’s Parliamentary Budget Officer (PBO) indicated that the unemployment rate was at 7.2% as of the end of the first quarter. This is likely to worsen significantly in the coming months: 14.8% in Q2, 15% in Q3, and 12.7% in Q4, with the year-end rate pegged at 12.4%.

MNP LTD’s late-March survey also found that 49% of Canadians are just $200 or less away from insolvency. Another 46% said that they are anxious about their current debt levels, while 34% fear for the stability of their employment.

Dottori-Attanasio said that the greatest threat in the near future is the accumulated stress on a consumer base already burdened by uncertainty surrounding the COVID-19 pandemic.

“If you add that people are no longer working and generating cash flow, I do think it makes for a toxic combination that’s going to be much more difficult to overcome the longer this takes to resolve,” Dottori-Attanasio said.  By Ephraim Vecina. 

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Mortgage Interest Rates

Fixed mortgage rate movement has stabilized and levelled out in the past week as lenders get more familiar with the new normal during uncertainty and as bond markets stabilized more.   Variable rates have also responded the same way.   Some lenders are using this opportunity to take market share for more competitive pricing and a slight drop in rates.  View rates Here – and be sure to contact us for a quote to help you find the lowest rate for your specific needs and product requirements.

The Bank of Canada’s target overnight rate is 0.25%.  Prime lending rate is 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers. The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval is 5.04%.  Changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.  Read the Government of Canada Department of Finance summary on Benchmark Rate for Insured Mortgages statement here. 

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Your Mortgage

If you have concerns about your mortgage and the rapidly changing market, please contact us to discuss your needs, concerns and options in detail to protect your best interest.

Ensure that your current mortgage is performing optimally, or if you are shopping for a mortgage, only finalize your decision when you are confident you have all the options and the best deals with lowest rates for your needs.

Here at iMortgageBroker, we love looking after our clients’ needs to ensure you get all the options and the best deals and best results.  We do this by shopping your mortgage to all the lenders out there that includes banks, trust companies, credit unions, mortgage corporations & insurance companies.  We do this with a smile, and with service excellence!

Reach out to us – let us do all the hard work in getting you the best results and peace of mind!

We encourage you to follow guidelines from our public health authorities:

Middlesex Health Unit
https://www.healthunit.com/novel-coronavirus

Southwestern Public Health
https://www.swpublichealth.ca/content/community-update-novel-coronavirus-covid-19

Ontario Ministry of Health
https://www.ontario.ca/page/2019-novel-coronavirus

Public Health Canada
https://www.canada.ca/en/public-health/services/diseases/coronavirus-disease-covid-19.html

Factual Statistics Coronavirus COVID-19 Globally:
https://www.worldometers.info/coronavirus/
https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

17 Apr

RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

Residential Market Commentary – What we know, What we can hope for

We have been receiving a lot of unsettling economic data lately.

Coming out of February, unemployment stood at 5.6% and nearly 250,000 jobs had been created in the previous 12 months.  By the end of March, nearly a million jobs had disappeared.  The Conference Board of Canada projects that could climb to 2.8 million by the end of April.  The best guess right now is that unemployment stands at about 20%.

Nationally, March housing starts dropped 7.3% compared to February.  The value of building permits – a forward looking indicator – crashed in March, dropping 23%.

As distressing as the numbers are, the real anxiety remains the unknown.  But, many of the country’s best-known economists are putting on brave faces.  They point to the temporary nature of the job losses.  StatsCan reports most workers expect to be back on the job in about six months, once the coronavirus pandemic is deemed to be under control.  We have also come to know that month-to-month job numbers can be volatile and need to be watched over time to establish trends.

The decline in housing starts can, at least in part, be attributed to bans on new construction.  A number of jurisdictions are restricting builders to the completion of existing projects, only.  And the drop in building permits is uneven across the country.  B.C. is down nearly 27%, Ontario is down 50.5%, while Alberta increased nearly 12% and Halifax jumped 153%.  By First National Financial. 

Housing Market Another Victim of the Virus

Data released this morning from the Canadian Real Estate Association (CREA) showed national home sales fell 14.3% on a month-over-month (m-o-m) basis in March, the first national indication of the early impact of social isolation. The economic disruption and massive layoffs caused both buyers and sellers to increasingly retreat to the sidelines over the second half of the month.

Transactions were down on a m-o-m basis in the vast majority of local markets last month. Among Canada’s largest markets, sales declined in the Greater Toronto Area (GTA) (-20.8%), Montreal (-13.3%), Greater Vancouver (-2.9%), the Fraser Valley (-13.6%), Calgary (-26.3%), Edmonton (-13.2%), Winnipeg (-7.3%), Hamilton-Burlington (-24.9%) and Ottawa (-7.9%).

Actual (not seasonally adjusted) sales activity was still running 7.8% above a quiet March in 2019, although that was a considerable slowdown compared to the y-o-y gain of close to 30% recorded in February.

“March 2020 will be remembered around the planet for a long time. Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian REALTORS®,” said Jason Stephen, president of CREA. “After Friday the 13th, everything went sideways. REALTORS® are complying with government directives and advice, all the while adopting virtual technologies allowing them to continue showing properties to clients already in the market, and completing all necessary documents.”

“Numbers for March 2020 are a reflection of two very different realities, with most of the stronger sales and price growth recorded during the pre-COVID-19 reality which we are no longer in,” said Shaun Cathcart, CREA’s Senior Economist. “The numbers that matter most for understanding what follows are those from mid-March on, and things didn’t really start to ratchet down until week four. Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year.”

New Listings

The number of newly listed homes declined by 12.5% in March compared to the prior month. As with sales, the declines were recorded across the country.

With sales and new listings each falling by similar magnitudes in March, the national sales-to-new listings ratio edged back to 64% compared to 65.4% in February. While this is down slightly, the bigger picture is that this measure of market balance was remarkably little changed considering the extent to which current economic and social conditions are impacting both buyers and sellers.

Based on a comparison of the sales-to-new listings ratio with the long-term average, two-thirds of all local markets were in balanced market territory in March 2020. Virtually all of the remainder continued to favour sellers.

There were 4.3 months of inventory on a national basis at the end of March 2020. While this is up from the almost 15-year low of 3.8 months recorded in February, it remains almost a full month below the long-term average of 5.2 months. With the overall number of listings on the market continuing to fall in March, the m-o-m decline in the months of inventory measure was entirely the result of the outsized drop in sales activity.

The number of months of inventory is well above long-term averages in the Prairie provinces and Newfoundland & Labrador. By contrast, the measure is running well below long-term averages in Ontario, Quebec and the Maritime provinces. The measure remains in balanced territory in British Columbia.

Home Prices

With measures of market balance at this point, little changed from recent history, and most of the impact on sales and listings from the COVID-19 situation only showing up towards the end of March, the impact on housing prices will likely take a little longer to become apparent. Price measures for March 2020 were strongly influenced by very tight markets and a very strong start to the spring market in many parts of Canada before physical distancing measures were implemented.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% in March 2020 compared to February, marking its 10th consecutive monthly gain.

The MLS® HPI was up in March 2020 compared to the previous month in 16 of the 19 markets tracked by the index. (See the Table below)

Looking at the major Prairie markets, home price trends have ticked downwards in Calgary and Edmonton to start 2020 but have generally been stable since the beginning of last year. Prices in Saskatoon have also been stable over the last year, while those in Regina have continued to trend lower. Prices in Winnipeg have been on a slow upward trend since the beginning of 2019.

Meanwhile, the recovery in home prices has been in full swing throughout British Columbia and in Ontario’s Greater Golden Horseshoe (GGH) region. Further east, price growth in Ottawa, Montreal and Moncton continues as it has for some time now, with Ottawa and Montreal prices accelerating to start 2020.

Bottom Line: Clearly this is only the beginning, but the plunge in sales and new listings in the second half of March is indicative of the stall out in housing market activity likely until social distancing is removed and people feel safe enough to resume normal activities. No doubt, at that point, there will be buying opportunities, but right now, housing is just another contributor to the collapse in the economy.  By Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres.

Canadian home sales saw 14% drop in March

Home buying activity in major markets across Canada dropped steeply in the second half of March, leading to what amounted to a 14 percent decline in sales compared to February’s total.

While the strength of the first half of the month and the relative weakness of March 2019 ultimately led to a year-over-year national sales gain of 7.8 percent, the impact of the COVID-19 pandemic on Canada’s housing market is clear in the data published today by the Canadian Real Estate Association (CREA).

“March 2020 will be remembered around the planet for a long time. Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian REALTORS®. After Friday the 13th, everything went sideways,” said CREA President Jason Stephen in a media release accompanying the data.

The pandemic’s impact on housing activity is especially evident when comparing the relatively modest year-over-year sales gain seen in March to the near 30 percent increase recorded in February.

Although CREA published Canadian home sales data for the full month as is standard practice, the association’s Senior Economist Shaun Cathcart said the early March numbers reflect a “pre-COVID-19 reality which we are no longer in.”

“The numbers that matter most for understanding what follows are those from mid-March on, and things didn’t really start to ratchet down until week four,” Cathcart said. “Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year.”

As sales fell in March, CREA observed new listings declining by “similar magnitudes.” New listings dropped by 12.5 percent last month when compared to February data.

The CREA team believes that the full impact of the COVID-19 crisis on the Canadian housing market will become apparent in the months to come. While there is scant data to draw from on just how deeply affected Canadian housing will be, many industry leaders have come forward to voice confidence in the market’s ability to remain relatively stable through this challenging period.

“The impact of COVID-19 on the Canadian economy has been swift and violent, with layoffs driving high levels of unemployment across the country,” said Royal LePage CEO Phil Soper.

“While it is sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate,” he continued.

Soper noted that evidence from past housing downturns leads him to believe that Canadian home prices will not be significantly impacted in 2020.

“Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home,” he said.  By Sean MacKay. 

Real Estate Not Business As Usual

The Ontario Government extended emergency orders for the province until April 23, 2020. The list of essential businesses still includes real estate agent services, which the Government has grouped under Financial Services. Please note the Government has prohibited open house events, stipulating “Every person who is responsible for a business that provides real estate agent services shall ensure that the business does not host, provide or support any open house events.”

Not Business As Usual

The Real Estate Council of Ontario RECO) has emphasized, “Real estate brokerages, brokers and salespeople must cease hosting and attending open houses. In addition, RECO strongly recommends that brokers and salespeople follow the direction of health officials by limiting showings to situations where they are absolutely necessary.”

RECO has also said, “Everyone, including registrants, must take this crisis seriously for their own health and that of the general public. The Real Estate and Business Brokers Act, 2002 and the Code of Ethics include provisions that require registrants to practice with integrity, to promote the best interests of their clients and to act honourably and professionally. We take these matters very seriously. Registrants who demonstrate a blatant disregard for the protection of the public, by ignoring the direction of health officials during their trading activities, will face serious sanctions, including possible disciplinary prosecution by RECO.”

Check out more from RECO on some questions and guidelines.  By London St. Thomas Association of Realtors LSTAR 2020 President Blair Campbell.

What Landlords Need To Know

Despite federal and provincial government supports, a prolonged COVID-19 crisis and the resultant loss of jobs and income will make it difficult for some tenants to pay their rent.

As a landlord, it is important to know what type of supports you have in order to continue making mortgage payments and paying the bills. Both tenants and landlords alike need a more comprehensive solution through this crisis with the shared understanding that all Ontarians need a secure place to call home.

What are my responsibilities as a landlord?

Landlords should maintain an open line of communication with their tenants to ensure that both parties are aware of each others’ expectations during this time. Landlords should ensure that they comply with occupancy limits, increase sanitation of their properties and are able to comply with social distancing measures by providing video tours of properties.

As many have fallen on hard financial times due to COVID-19, it should be noted that the Ontario government has ordered a stop to all evictions during the State of Emergency.

Buying or selling a tenanted property?

If a client has an urgent need to buy or sell a home during the COVID-19 crisis, REALTORS® have the modern tools and knowledge at their disposal to do virtual showings.

REALTORS® should work with landlords and tenants to ensure that the health and well-being of Ontario’s home buyers, sellers and families remains a focus. REALTORS® and landlords are encouraged to use modern technology that facilitates remote interactions, such as virtual tours, video conferencing and digital signing.

Do tenants need to pay rent?

Tenants need to continue paying rent during the COVID-19 pandemic. If your tenants’ financial situation has been affected by the coronavirus, landlords should work with their tenants to come to an agreement surrounding rent payments, reductions and deferrals.

What financial relief is available for landlords?

Mortgage Deferral

Canada’s big six banks are offering deferred mortgage payments for up to six months on a case-by-case basis. Landlords may be eligible for mortgage deferrals on their non-principal residence, including a rental property. For more information, please see our detailed guide for homeowners and reach out to your financial advisor.

Tax Extensions

The Canada Revenue Agency (CRA) has extended the deadline for filing income tax returns to June 1, 2020, and the deadline for payment of income tax to September 1, 2020.

Temporary Wage Subsidy for Employers

A Temporary Wage Subsidy is available for eligible employers, like landlords, that will allow for a reduction in the amount of payroll deductions require to be remitted to the CRA. Employers must see a 15 percent decline in revenue for March compared to January and February of 2020 to apply for the subsidy. Employers can apply through the CRA’s My Business Account portal.

Read an open letter to Minister Steve Clark from OREA CEO Tim Hudak about supporting rental-housing providers during the COVID-19 Crisis.  By OREA.

Economic Highlights

Bank of Canada holds the line on its benchmark rate

This morning, the Bank of Canada left its target overnight benchmark rate unchanged at ¼ percent, which the Bank has framed as its effective “lower bound.”

This decision was expected after the BoC lowered its target for the overnight rate 150 basis points since the beginning of March.

Comparing the Bank’s two most recent statements (today and March 27, 2020), we find several notable new comments on the economy and financial markets:

  • While the outlook is “too uncertain” to provide a complete forecast, analysis of alternative scenarios suggests the level of real economic activity was down 1-3 percent in the first quarter of 2020 and will be 15-30 percent lower in the second quarter than in Q4 2019.
  • CPI inflation is expected to be close to 0 percent in the second quarter of 2020 “primarily due to the transitory effects of lower gasoline prices.”
  • Efforts to contain the COVID-19 pandemic have “caused a sudden and deep contraction in economic activity and employment worldwide.”
  • In financial markets, this has driven a “flight to safety and a sharp repricing of a wide range of assets” and has pushed down prices for commodities.
  • One “early measure of the extent of the damage” was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April some six million Canadians had applied for the Canada Emergency Response Benefit.
  • Fiscal programs, “designed to expand according to the magnitude of the shock,” will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery.

The Bank also reported that it is “temporarily increasing” the amount of Treasury Bills it acquires at auctions to up to 40 percent, effective immediately.

More new measures to support Canada’s financial system

The BoC also announced new measures to provide additional support to Canada’s financial system and ease pressure on Canadian borrowers including the development of:

  1. A new Provincial Bond Purchase Program of up to $50 billion to supplement its Provincial Money Market Purchase Program.
  2. A new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment-grade corporate bonds in the secondary market.

The central bank promised both programs will be put in place in the coming weeks. The Bank also announced it is enhancing its Term Repo Facility to permit funding for up to 24 months.

As containment restrictions are eased and economic activity resumes, BoC believes that fiscal and monetary policy actions will help “underpin confidence and stimulate spending by consumers and businesses to restore growth.”

The Bank also released its Monetary Policy Report for April. During a related news conference, Stephen Poloz,  Governor of the Bank of Canada noted that the Bank has so far “accumulated over $200 billion of new assets—amounting to about 10 percent of Canada’s GDP – in liquidity support for the economy.”

BoC’s next scheduled policy announcement is June 3, 2020 and in the ensuing period the Bank’s Governing Council noted that it “stands ready to adjust the scale or duration of its programs if necessary.” It further stated that all of its actions are “aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.”  By First National Financial.  

Bank of Canada Stands Ready To Do Whatever It Takes

On the heels of a devastating decline in the Canadian economy, the Bank of Canada is taking unprecedented actions. With record job losses, plunging confidence and a shutdown of most businesses, this month’s newly released Monetary Policy Report (MPR) is a portrait of extreme financial stress and a sharp and sudden contraction across the globe. COVID-19 and the collapse in oil prices are having a never-before-seen economic impact and policy response.

The Bank’s MPR says, “Until the outbreak is contained, a substantial proportion of economic activity will be affected. The suddenness of these effects has created shockwaves in financial markets, leading to a general flight to safety, a sharp repricing of risky assets and a breakdown in the functioning of many markets.” It goes on to state, “While the global and Canadian economies are expected to rebound once the medical emergency ends, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it. The recovery will also depend on how households and businesses behave in response. None of these can be forecast with any degree of confidence.”

“The Canadian economy was in a solid position ahead of the COVID-19 outbreak but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April, some six million Canadians had applied for the Canada Emergency Response Benefit.”

“The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.”

Today’s MPR breaks with tradition. It does not provide a detailed economic forecast. Such forecasts are useless given the degree of uncertainty and the lack of former relevant precedents. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1%-to-3% in the first quarter of this year and will be 15%-to-30% lower in the second quarter than in Q4 of 2019. Inflation is forecast at 0%, mainly owing to the fall in gasoline prices.

“Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.”

The Bank of Canada, along with all other central banks, have taken measures to support the functioning of core financial markets and provide liquidity to financial institutions, including making large-scale asset purchases and sharply lowering interest rates. The Bank reduced overnight interest rates in three steps last month by 150 basis points to 0.25%, which the Bank considers its “effective lower bound”. It did not cut this policy rate again today, as promised, believing that negative interest rates are not the appropriate policy response. The Bank has also conducted lending operations to financial institutions and asset purchases in core funding markets, amounting to around $200 billion.

“These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank.”

The Bank of Canada, in its efforts to provide liquidity to all strained financial markets, has, in essence, become the buyer of last resort. Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market. It will increase the level of purchases as required to maintain the proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40%, effective immediately.

The Bank announced new measures to provide additional support for Canada’s financial system. It will commence a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment-grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.

The Bank will support all Canadian financial markets, with the exception of the stock market, and it “stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.”

This is exactly what the central bank needs to do to instill confidence that Canadian financial markets will remain viable. These measures are a warranted offset to panic selling. Too many investors are prone to panic in times like these, which has a snowball effect that must be avoided. As long as people are confident that the Bank of Canada is a backstop, panic can be mitigated. The Bank of Canada deserves high marks for responding effectively to this crisis and remaining on guard. Governor Poloz and the Governing Council saw it early for what it is, a Black Swan of enormous proportions.

As a result, Canada will not only weather the pandemic storm better than many other countries, but we will come out of this economic and financial tsunami in better condition.  By Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres.

Mortgage Interest Rates

The Bank of Canada’s target overnight rate is 0.25%.  Prime lending rate is 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers. The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval is 5.04%.  Changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.  Read the Government of Canada Department of Finance summary on Benchmark Rate for Insured Mortgages statement here. 

Fixed mortgage rate movement has stabilized and levelled out in the past week as lenders get more familiar with a new normal during uncertainty.   Variable rates have also responded the same way.   

View rates Here – and be sure to contact us for a quote to help you find the lowest rate for your specific needs and product requirements.

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Your Mortgage

If you have concerns about your mortgage and the rapidly changing market, please contact us to discuss your needs, concerns and options in detail to protect your best interest.

Ensure that your current mortgage is performing optimally, or if you are shopping for a mortgage, only finalize your decision when you are confident you have all the options and the best deals with lowest rates for your needs.

Here at iMortgageBroker, we love looking after our clients’ needs to ensure you get all the options and the best deals and best results.  We do this by shopping your mortgage to all the lenders out there that includes banks, trust companies, credit unions, mortgage corporations & insurance companies.  We do this with a smile, and with service excellence!

Reach out to us – let us do all the hard work in getting you the best results and peace of mind!

We encourage you to follow guidelines from our public health authorities:

Middlesex Health Unit

https://www.healthunit.com/novel-coronavirus

Southwestern Public Health

https://www.swpublichealth.ca/content/community-update-novel-coronavirus-covid-19

Ontario Ministry of Health

https://www.ontario.ca/page/2019-novel-coronavirus

Public Health Canada

https://www.canada.ca/en/public-health/services/diseases/coronavirus-disease-covid-19.html

Factual Statistics Coronavirus COVID-19 Globally:

https://www.worldometers.info/coronavirus/

https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

 

9 Apr

RESIDENTIAL MARKET UPDATE

General

Posted by: Adriaan Driessen

Industry & Market Highlights 
Update on Ontario Essential Businesses

The Government of Ontario announced it is reducing the list of businesses classified as essential and ordering more workplaces to close, to prevent the spread of COVID-19. The updated list of essential businesses does include real estate agent services, which the Government has grouped under Financial Services.

In his news conference today, Premier Ford said unnecessary industrial construction will stop, and new starts in residential projects will stop. There will also be higher scrutiny at critical construction sites, such as new hospitals, roads and bridges. The closure will take effect as of Saturday, April 4, 2020 at 11:59 pm.

Check out the full news release for more details.

Again, this is NOT business as usual. LSTAR urges its Members to practise social distancing and use all the tools available to support clients and close transactions remotely, following the guidelines from Public Health Authorities.  By LSTAR 2020 President Blair Campbell.

March home sales remain steady

London and St. Thomas Association of REALTORS® (LSTAR) announced that 866 homes exchanged hands in March, an increase of 6.9% compared to March 2019. Units sold are on par with the 10-year average.

“For the first quarter, home sales in 2020 are at 2,170, 12.3% ahead of 2019,” said 2020 LSTAR President Blair Campbell. “But with the COVID-19 pandemic affecting all businesses, there is an expectation the marketplace will be impacted in the coming weeks and months. We’ll have to wait and see what this means for LSTAR’s jurisdiction, based on data for the upcoming monthly cycles.”

“First I want to stress that LSTAR’s highest priority during this challenging time is the safety and well-being of its Members and staff,” Campbell said. “We continue to urge members to practice social distancing and follow the guidelines set by our public health authorities. It is not business as usual.”

Compared to a year ago, the overall average home price experienced an increase of 10.3%, rising to $447,152 in March. This average sales price includes all housing types, from single detached homes to high rise apartment condominiums. Across the five major areas of LSTAR’s region, average home sales price continued to increase. The following table illustrates last month’s average home prices by area and how they compare to the values recorded at the end of March 2019.

“Looking at average prices in London’s three main geographic areas, London East saw the biggest gain compared to March 2019,” Campbell said.

The average home price in London East was $393,661, up 20.8% from the same time last year, while London North increased 1.4% over to $527,231. In London South (which contains data from the west), the average home price was $458,666, up 13.8% over March 2019. St. Thomas saw an average price of $392,196, an increase of 8.5% from last March.

The following chart is based on data taken from the CREA National Price Map for February 2020 (the latest CREA statistics available). It provides a snapshot of how home prices in London and St. Thomas compare to some other major Ontario and Canadian centres.

According to a research report[1], a total of $67,425 in ancillary expenditures is generated by the average housing transaction in Ontario over a period of three years from the date of purchase.

“This means that our March home sales would bring more than $58 million back into the local economy throughout the next few years,” Campbell said. “The business of real estate affects many facets of the economy, so we’ll be monitoring the impacts of the COVID-19 pandemic.”  By LSTAR London St. Thomas Association of Realtors

Area realtors brace for pandemic’s impact despite solid month in March

Homes sales in the London region held their own in March despite the COVID-19 pandemic, but that could change in the coming months, warns the president of the local realtors association.

A total of 866 homes were sold last month, a figure on par with the 10-year average and 52 more than in March 2019, the London and St. Thomas Association of Realtors (LSTAR) says.

But the threat of the coronavirus looms large in the forecast, threatening to derail what was shaping up to be a strong year for the region that also takes in Strathroy, St. Thomas and parts of Elgin and Middlesex counties – though not enough to bring a dramatic drop in home prices.

“Unfortunately, it may not be the banner year that we were hoping,” said Blair Campbell, LSTAR’s president.

“The longer the COVID-19 situation goes on, the more likely that that banner year goes out the window.”

Including March sales figures, area realtors sold 2,174 homes in the first quarter of 2020.

That’s 232 more homes sold than in the same period of 2019, a year that ended up being only the third time in which annual sales topped 10,000, leading to the early optimism for 2020.

The stronger-than-expected numbers for March, coming amid social distancing rules and the shutdown of schools and non-essential businesses to slow the spread of the virus, are a reflection of what until now has been a sizzling hot real estate market, Campbell said.

“The coronavirus hit us mid-month and we were full steam ahead prior to that,” he said.

“We had lots of people that were mid-transaction who felt the need to really act quickly, so I think that’s where the numbers are coming from.”

April will likely be a different story, Campbell said.

“I think we will see, particularly next month, really what that impact” of the coronavirus is, he said.

“I think it’ll impact the total activity, the number of sales.”

Though March numbers don’t reflect it, there are other signs of how the coronavirus is already changing the market.

Open houses across the city have been cancelled and a growing number of showings are being done virtually. Urged to avoid in-person showing, realtors are following strict sanitation on viewings deemed necessary.

“It’s not business as usual, that’s for sure,” said Melissa Laprise, a Century 21 realtor.

“Considering what we’re going through right now, virtual tours are becoming a very, very utilized tool.”

Regardless, Laprise also anticipates a slow April, traditionally one of the strongest months for home sales.

“A lot of clients are holding off until this is clear.”

Nationally, social distancing measures could see resales plunge 30 per cent to a 20-year low and the first nationwide drop in prices since 2009, RBC says.

Campbell, however, wasn’t sure that will be the case in the London region, where the average resale price increased in March to $447,000, a 10.3 per cent jump from March 2019.

“I think what we’ll see is likely a stabilizing and a slowdown in total activity, both on the supply and demand side, so that should keep prices as an equilibrium,” he said, adding he expects the market to rebound in the fall and next year.

“It’s not that people don’t want to buy and sell homes. It’s just much more difficult to do that while staying in your own home.”  By Jonathan Juha, With files from Bloomberg.

Canadian housing market recovery may begin by early summer: RBC

Canada’s spring house hunting season — typically the busiest time of the year for home transactions — will be effectively cancelled this year.

The strict social distancing measures that are critical to the fight against COVID-19 will make it all but impossible to follow through with the activities that the conventional home sales process necessitates

That’s the takeaway for the near term Canadian housing picture from RBC Senior Economist and housing market expert Robert Hogue from a thought leadership piece published earlier this week.

“We expect realtors to suspend open houses and cut any private showings to a bare minimum,” he wrote. “There will be plenty of reasons for sellers to wait and see as well. A shock like this one is an inauspicious time to get full value for a property. We expect for-sale inventories to shrink, which will further contribute to stall activity.”

While the outlook for the spring months is bleak, Hogue delivers some much appreciated optimism about a timeline for a housing market recovery. This message is you shouldn’t expect activity to resume overnight, but RBC is currently “penciling in” an early summer “restart.”

Of course, as with all things during this uncertain period, the exact timing is highly dependent on the duration of the COVID-19 crisis and how soon the strict measures are lifted or gradually relaxed.

“We think the recovery will come in stages — taking buyers up to a year to regroup and rebuild confidence amid high unemployment,” wrote Hogue.

Even in an optimistic recovery scenario, Canadian home sales will take a huge hit on the year, with Hogue projecting a nearly 30 percent dive as sales reach a 20-year low at the national level. But looking to 2021, the economist sees a massive sales surge on the horizon when the “temporary shock” of the pandemic sits comfortably in the rearview mirror.

“Exceptionally low interest rates, strengthening job markets and bounce-back in in-migration will generate substantial tailwind. We project home resales to surge more than 40% to 491,000 units in 2021,” wrote Hogue.  By Sean Mackay.

Site closed: No new residential construction in ON after April 4

Speaking from Queen’s Park on Friday afternoon, Ontario Premier Doug Ford announced a halt to all residential construction in the province. As of 11:59 p.m. on April 4, the only projects allowed to continue will be those single-family, semi-detached and townhouse properties which have secured either footing or above-grade structural permits. Renovations to residential properties that were initiated prior to April 4 will also be permitted.

While the announcement was hardly unexpected considering the surging number of COVID-19 infections in the province, it comes at one of the worst possible times for Ontario home buyers. Demand for properties, both new and old, continues to be driven by rapid population growth, while active inventory is at record lows in community after community.

“If construction projects are delayed for four or five months, maybe the market will absorb that, and maybe we won’t feel a shock,” says Bosley Real Estate’s David Fleming. “But if you’re talking every single project that was supposed to be started is now delayed six, eight months – or let’s say that it takes longer to start up again after [builders] are given the green light – I do think that in the future you could have that period where you’re expecting the volume to come onto the market – and it doesn’t – and prices go up as a result.”

The question most prospective home buyers may be turning over in their minds is whether the higher prices associated with lower supply will be overpowered by the dip in prices most are expecting in the coming months. According to PSR Brokerage’s president of pre-construction and development, Ryan Yair Rabinovich, the price drops many are hoping for may not materialize.

Resale buyers, he says, unless they’re forced to by their own financial circumstances, are unlikely to sell if home prices fall, especially those who survived the global financial crisis of only a decade ago.

“2008 and 2009 is still fresh in many real estate owners’ minds,” he says. “They realize that it wasn’t actually as bad, and it didn’t take as long to recover, as people initially thought it would take.”

For new product, the likelihood of lower prices is even less likely, as developers are under severe pressure for their projects to remain profitable.

“Ninety-five percent of developers in the GTA use construction loans from banks,” Rabinovich explains. “Banks won’t lend a single dollar toward construction if you don’t have the minimal profit margin in a project.”

While he hopes that construction projects will be allowed to fire up in eight to 12 weeks, Rabinovich says shuttered projects will still face the same scaling-up challenges they dealt with before the COVID-19 crisis, which will only add to the delays.

“It’s not something where Ford unlatches the lock on this thing, and the next day you have all your trades on site. It requires a lot of coordination and lot of time,” he says.

With new construction projects often taking anywhere between four and six years to complete, the effects of the construction halt are impossible to gauge. But one thing is certain: anyone in Ontario who complains about “all the cranes in the sky” today will be feeling their absence soon enough. By Clay Jarvis

Landlords learn to navigate rent payment uncertainty during COVID-19 crisis

While April 1st has historically been a day reserved for practical jokes and gags, in 2020, there’s little to laugh about, especially when the rent is due.

The first day of April this year was not only when Canada surpassed 9,000 confirmed cases of COVID-19 nationwide, but the first of many months in which tenants and landlords will likely face rent payment difficulties. With the forced closure of non-essential businesses across Ontario, alongside layoffs and reduced staff hours, thousands of residential and commercial tenants have seen their source of income shrink or evaporate entirely. As tenants continue to grapple with forced unemployment, landlords of all sizes must also find the right approach to payments in the weeks and months to come.

“It looks like April seems to be okay, for now,” said Nawar Naji, a Toronto real estate investor and broker with Chestnut Park Real Estate. “The issues are possibly with May and June. As more companies lay off, more people go on EI, I think there will be more issues down the line.”

Naji has four residential tenants, along with clients who have tenants of their own. For April, Naji explained that rental payments don’t appear to be an issue, but some of his tenants have expressed concerns about rent as the shutdown drags on. In the weeks and months ahead, he plans to take a customized, one-on-one approach to his tenants’ rental payments.

“We’re going to talk to them the second, third week of April and see where everybody is at,” said Naji.

For Mark Kenney, President and CEO of Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), tenant payment issues are not a new concept. The ongoing coronavirus crisis has left some tenants within CAPREIT’s 65,000 rental units mired in financial uncertainty, but for those who are facing difficulties, Kenney says that most of them have been open to working on an arrangement with property managers.

“Our compassion hasn’t changed,” said Kenney. “We’ve always, since our inception, made payment plans if somebody has economic disruption, and the pandemic, it’s not the first time people have experienced economic disruption, it’s just on a bigger scale.”

Payment solutions with landlords have varied, ranging from portional monthly payments — in which the remainder of the rent is paid later in the year — to using the tenant’s last-month deposit sum. Greenrock Real Estate Advisors (GREA), a Toronto-based property management and real estate services company with multiple rental buildings, developed a rental assistance program that allows their tenants to use their last month’s rent deposit as a credit towards their regular payments, either in portions or in full.

“GREA is also cognisant of the financial hardships its residents may face during this time,” GREA stated in a press release. “While our three levels of Government have promised various measures of support, it will take time for these relief funds to be disbursed.”

Amid forced closure, commercial tenants are also experiencing rental payment uncertainty, with restaurants and small businesses being among the most vulnerable. The federal government has offered up to $40,000 in interest-free loans to small businesses and not-for-profit organizations in response to COVID-19, though some business owners have argued that this would tack on more debt than many companies can bear. To provide relief, some larger commercial landlords have granted rent deferral options. Ivanhoé Cambridge confirmed to Livabl that it would be providing deferral solutions to certain Canadian retail tenants on a case-by-case basis.

While some landlords have been able to negotiate rental payments with their tenants, others have not been so empathetic. Governments across the country have intervened to varying degrees, with British Columbia banning most evictions during the pandemic and Ontario closing the Landlord and Tenant Board.

“Landlords can still give eviction notices, however, landlords are encouraged to work with tenants to establish fair arrangements to keep tenants in their homes, including deferring rent or other payment arrangements,” reads the Ontario.ca website.

However, there are exploitive outliers.

“I heard a story about a landlord who was coming up with a loan program to tenants, charging them interest. It’s disgusting,” says Kenney. “All landlords are not the same. We shouldn’t be painted with one brush. And all tenants aren’t the same, and they shouldn’t be painted with one brush. I think it’s really important that people exercise compassion and decency.”

Kenney, who said that he is vehemently against evictions right now, believes that more leadership needs to come from the government to protect tenants from landlords, such as those who could issue large rent increases on new construction units in the current environment.

Meanwhile, there have been calls for rent strikes by housing activists, such as Parkdale Organize, who advised residents not to pay rent on April 1st so tenants can “make the reasonable and responsible choice to keep the money they need to live in these uncertain times need support,” according to the Keep Your Rent webpage.

Both Kenney and Naji shared concerns about a possible rent strike’s impact on landlord mortgage payments. Kenney explained that while eligible homeowners can defer mortgage payments, some tenants feel that they don’t need to meet rental obligations, even if they’re still working. He is worried about the 80 percent of small landlords across Canada who are not protected by income from a large volume of units.

“Everybody’s got to pay their obligations and if there’s circumstances where people can’t pay rent or can’t pay a mortgage then they need to work it out together as a team, because we’re all in this together,” said Naji.  By Michelle McNally

Economic Highlights
Canada Loses Over a Million Jobs in March

Employment in Canada collapsed in March, with over one million jobs lost, wiping away over three years of job creation in a single month and highlighting the economic pain the coronavirus pandemic has swiftly delivered. The decline in jobs in Canada, on a proportional basis, was steeper than in the U.S. The record plunge was anticipated after officials here revealed that in the span of roughly a month, 5 million people, about 20% of the country’s labour force, have applied for emergency income support. This reflects Canada’s relatively rapid widespread implementation of social distancing.

The sharp increase in unemployment initially caught policymakers by surprise, prompting them to shift their response toward wage subsidies in order to prevent across-the-board layoffs. About 70% of direct stimulus spending is now targeted at keeping workers on payrolls.

The net number of new jobs plunged by 1.01 million from February, the largest decline in records dating back to 1976, Statistics Canada said Thursday in Ottawa. The jobless rate surged from 5.6% in February to 7.8% in March.

Actual hours worked declined by 14% from a year ago, and 15% from the previous month, both records.

The March Labour Force Survey (LFS) results reflect labour market conditions during the week of March 15 to 21. By then, a sequence of unprecedented government interventions related to COVID-19—including the closure of non-essential businesses, travel restrictions, and public health measures directing Canadians to limit public interactions—had been put in place. These interventions resulted in a dramatic slowdown in economic activity and a sudden shock to the Canadian labour market. Today’s data might just be a preview of even worse numbers ahead as the economy heads for its deepest downdraft since the Great Depression. 

As bad as these numbers are, Statistics Canada said they do not fully measure the size and extent of the impact of COVOD-19 on Canadian workers and businesses. Additional measures are required to do that which include the number of Canadians who kept their job but worked reduced hours, and the number of people who did not look for work because of ongoing business closures. Of those who were employed in March, the number who did not work any hours during the reference week (March 15 to 21) increased by 1.3 million, while the number who worked less than half of their usual hours increased by 800,000. These increases in absences from work can be attributed to COVID-19 and bring the total number of Canadians who were affected by either job loss or reduced hours to 3.1 million.

Regionally, employment fell in all provinces, with Ontario (-403,000 or -5.3%), Quebec (-264,000 or -6.0%), British Columbia (-132,000 or -5.2%) and Alberta (-117,000 or -5.0%) the hardest hit.

The unemployment rate increased in all provinces except Newfoundland and Labrador and Prince Edward Island. The largest increases were in Quebec (+3.6 percentage points to 8.1%), British Columbia (+2.2 percentage points to 7.2%) and Ontario (+2.1 percentage points to 7.6%). See the table below for the jobless rate in each province.

In March, the number of people who were out of the labour force—that is, those who were neither employed nor unemployed—increased by 644,000. Of those not in the labour force, 219,000 had worked recently and wanted a job but did not search for one, an increase of 193,000 (+743%); because they had not looked for work and they were not temporarily laid off, these people are not counted as unemployed. Since historically the number of people in this group is generally very small and stable, the full monthly increase can be reasonably attributed to COVID-19.

Employment decreased more sharply in March among employees in the private sector (-830,200 or -6.7%) than in the public sector (-144,600 or -3.7%).

The number of self-employed workers decreased relatively little in March (-1.2% or -35,900) and was virtually unchanged compared with 12 months earlier. The number of own-account self-employed workers with no employees increased by 1.2% in March (not adjusted for seasonality). Most of this increase was due to an increase in the healthcare and social assistance industry (+16.7%), which offset declines in several other industries. At the onset of a sudden labour market shock, self-employed workers are likely to continue to report an attachment to their business, even as business conditions deteriorate.

The service sector was hardest hit, with almost all of the 1 million decline in employment concentrated in that category. The largest employment declines were recorded in industries that involve public-facing activities or limited ability to work from home. This includes accommodation and food services (-23.9%); information, culture and recreation (-13.3%); educational services (-9.1%); and wholesale and retail trade (-7.2%).

Smaller employment declines were observed in most other sectors, including those related to essential services, such as health care and social assistance (-4.0%). Employment was little changed in public administration; construction; and professional, scientific and technical services. Surprisingly, employment in natural resources rose despite the collapse of oil prices in March.

Females were also more likely to lose jobs than their male counterparts. Among core-aged workers, female employment dropped more than twice that of men, which might reflect the dominance of males in the construction industry, which was in large measure considered essential work in March. The private sector was responsible for a majority of the losses with employment dropping by 830,200.

Bottom Line: The chart below shows the unprecedented magnitude of the drop in employment last month compared to other recession periods, but this is not your typical recession. This was a government-induced work stoppage to protect us from COVID-19; to flatten the curve of new cases so that our healthcare system could better accommodate the onslaught of critically ill patients. While these are still early days, the data suggests that Canada’s early and dramatic nationwide response to the pandemic has been the right thing to do. We only need to look as near as the United States, where shutdowns were piecemeal, tentative and late. The number of COVID-19 cases is more than 22 times larger in the US than in Canada, while the population is only ten times the size. 

To be sure, economic growth in the second quarter will be dismal. The economists at the Royal Bank have just posted a forecasted growth rate of an unprecedented -32% in Q2 and a jobless rate rising to 14.6%. They see a bounceback of +20% growth in the third quarter, although it will take until 2022 until Canadian GDP returns to its pre-pandemic level. Underpinning this forecast is the assumption that the economy will be in lock-down for about 12 weeks, with activity only gradually returning to normal after that. 

According to the Royal Bank report, “Home resales are expected to fall 20% this year. Job losses, reduced work hours and income, as well as equity-market declines, will keep many buyers out of the market. Governments and banks have policies in place to help owners through this tough patch which should limit forced-selling and a glut of properties coming onto the market. But that doesn’t mean prices won’t come under downward pressure. As in many other industries, we expect the recovery in housing will be gradual. Low interest rates will be a stabilizing force, though it will take a rebound in the labour market as well as a pickup in immigration before sales really accelerate. Our view is that most of the recovery will occur in 2021.”

Policymakers have been extremely aggressive in providing income and wage supports. The central bank is unlikely to reduce interest rates below the current overnight rate of 0.25%, but the BoC will continue large-scale purchases of government bonds, mortgage-backed securities (along with CMHC), bankers’ acceptances and commercial paper–reducing the cost of funds for the banks and improving liquidity in all markets. “All told, the government support measures add up to 11.5% of GDP making the entire package one of the largest of the developed countries.

Residential Market Commentary – March limps away

As the old saying goes, March comes in like a lion and goes out like a lamb.  For Canada’s housing market, that is all too true this year.  And the country’s two biggest markets make it abundantly clear.

The Canadian Real Estate Association reported strong year-over-year sales gains of 26% coming out of February.  The Toronto Region Real Estate Board clocked-in with a 49% y/y increase for the first 14 days of March.  But then COVID-9 entrenched itself as a bitter reality and things slumped. 

Government imposed shutdowns and the implementation of social distancing have pretty much ended open houses and any face-to-face meetings with clients for both realtors and mortgage brokers.  Real estate boards across the country have banned such interactions or are strongly recommending against them.

The Toronto-area market plunged in the second half of March, with sales falling to 16% below year ago levels.  The month ended with a 12% gain over March of 2019.  By comparison, February ended with a 44% increase over a year ago.  A rough calculation by one of the big banks puts March activity at 23% below February.

The country’s other hot market, Vancouver, experienced a similar second half collapse in March, but came out of the month with a 46% increase in sales activity.  That number is tempered, though, by a particularly weak March, last year.

Market watchers expect a continuing slowdown as the COVID-19 outbreak worsens and anti-virus measures intensify.  They caution that property values will likely come under increasing downward pressure and that extremely light activity will make the market vulnerable to erratic price moves.  By First National Financial

Ellis and McKenzie address COVID-19’s impact on borrowers and markets

On Friday afternoon, April 3, 2020, First National’s Jason Ellis, President and Chief Operating Officer, and Scott McKenzie, Senior Vice President of Residential Mortgages, participated in a special webinar dedicated to sharing insights into current conditions in Canada’s mortgage markets and efforts the company is making to assist mortgage brokers and their clients through this difficult time. Here are the key takeaways beginning with Jason’s synopsis of interest rate changes between January and March.

Bank debt, mortgage backed securities and asset-backed commercial paper were well bid and generally trading at relatively narrow spreads to open 2020. Toward the end of January 5-year Canada Bonds were trading around 1.5%, a 5-year fixed rate mortgage was approximately 2.89%, the Bank of Canada overnight rate was 1.75%, the prime rate was 3.95% and adjustable rate mortgages were generally offered at discounts to prime of as much as 1%.

As the reality of the pandemic began to play out, 5-year bond yields fell to as low as 35 basis points in intra-day trading and, with that, fixed mortgage rates also fell to as low as 2.39%. In March, the Bank of Canada cut rates by 50 basis points on three separate occasions.

The Bank of Canada’s overnight administered rate is now just 25 basis points, the lowest since the global financial crisis when the overnight rate was cut 425 basis points between December 2007 and May 2009.

The prime rate has followed the Bank of Canada rate lower, from 3.95% in January 2020 to 2.45% today. But fixed mortgage rates, which did drop briefly to 2.39%, have moved back up to 2.84% today, leaving them effectively unchanged despite the fact that underlying Government of Canada bond yields are 100 basis points lower. 

There is a common misconception that 5-year fixed mortgage rates are inextricably linked to 5-year Government of Canada bond yields and that cuts to the Bank of Canada’s overnight rate always result in lower 5-year fixed mortgage coupons. Although the five-year Canada bond yield does act as the base from which other rates are set including 5-year mortgages, the reality is there is not a one-to-one relationship.

Today, spreads on bail-in funds Schedule I banks use to fund mortgages have increased and spreads on mortgage backed securities (“MBS”) that non-bank lenders like First National use for funding have also increased. Effectively, the traditional relationship between mortgage coupons and government yields has broken down and as a result, the coupon on mortgages is higher than it would be otherwise.

A similar phenomenon has taken place for adjustable rate mortgages which are traditionally thought of as being linked to the prime rate. Behind the prime rate, bank and non-bank cost of funds more closely follow the CDOR or the Canadian Dollar Offered Rate.  CDOR is an index which references the market where asset backed commercial paper and Banker’s Acceptances (“BAs”) are generally traded. Normally there is a relationship between prime and CDOR that is predictable and stable. However, in this environment, bank clients are drawing down on their committed lending facilities. In order to meet demand for cash, banks are issuing Banker’s Acceptances. This supply of BAs has put pressure on the demand side and yields have increased. The normal relationship between CDOR and other rates like prime is now broken and lenders have been required to eliminate the discount from prime to normalize the relationship between mortgage coupons and the cost of funds.  As it costs lenders more to borrow, they must charge more to lend.

Market data show that home purchases declined in the last two weeks of March, and while volume reductions are likely to continue, it’s not possible to predict by how much or for how long.

Government Responses

Because this is more of a main street problem than a Bay Street problem, the government’s response to these economic conditions has been extraordinary – faster and bigger than anything we have ever seen. Some of the responses include the re-introduction of the Insured Mortgage Purchase Program which was first used during the liquidity crisis. It began at $50 billion but was quickly upsized to $150 billion. The Canada Mortgage Bond program has been increased from $40 billion to $60 billion. And the Bank of Canada is now purchasing Canada Mortgage Bonds in the secondary market and has introduced both a Banker’s Acceptance purchase program and a Commercial Paper purchase program along with a Term Repo Purchase Facility with an expanded set of eligible collateral including MBS.

While the government is spending a great deal of money funding initiatives like the Insured Mortgage Purchase program, it is buying triple A-rated securities at extremely elevated spreads and financing those purchases through the issuance of risk-free government debt at materially lower yields. As a result, the government stands to earn significant net interest margin by providing this liquidity.  This will ultimately help finance many of the government’s fiscal initiatives.

Despite all of these actions, including unprecedented help for consumers, the market response has been surprisingly muted. To be clear, the programs have been critical in providing liquidity and creating ceilings on spreads in BA, commercial paper and MBS markets. The programs have provided a critical stabilizing effect and spreads have narrowed from their widest levels. However, there is a long way to go before the markets return to anything close to normal conditions.

Mortgage Deferrals

Mortgage deferrals, when granted, continue to incur interest. The deferred interest from a deferred payment is capitalized to the principal of the mortgage at the prevailing coupon rate.  Some market commentators have been unfairly critical of this approach. For clarity, mortgage payment deferrals are not financed by a government program.  The financial burden falls on the mortgage lenders.  Banks and non-bank lenders alike fund mortgages with other debt including covered bonds, deposit notes, commercial paper, and mortgage backed securities.  The monthly interest and in some cases principal on these debt instruments must still be paid even while the payments on underlying mortgages are deferred. 

At maturity, borrowers with an approved deferral of payment from First National will be offered a rate to renew and their mortgage will be rolled seamlessly into a new term. This should be comforting for those who find themselves in a renewal situation while facing temporary financial hardship related to COVID-19.

Borrowers will not be expected to repay the deferred interest at the time of renewal. Because the deferred interest is capitalized, it will be paid out over the remaining amortization period unless the mortgage is discharged at the end of the term. 

If a borrower is granted a deferral by First National, the mortgage will not be reported as “in arrears.” Similarly, if a borrower misses a payment before being granted a deferral, that mortgage will also not be reported to credit rating agencies as “in arrears.”

Mortgage insurers have asked lenders to use deferrals as the way of helping borrowers facing issues rather than entertain other measures such as extending amortization periods.  By First National Financial

Purchasing power to further weaken as small businesses fold

Canadian purchasing power will significantly decline in the near future as nearly one-third (32%) of small business owners admitted that they are not sure they will reopen after the COVID-19 crisis, according to a new study.

The recent survey by the Canadian Federation of Independent Business (CFIB) also found that on average, small businesses lost around $160,000 due to the fiscal and economic ravages of the pandemic.

A separate poll has warned that 47% of Canadians cannot afford to miss even just one day of work as they have neither back-up funds nor benefits. Another 23% also fear that they might lose their current jobs, the Financial Post reported.

“The income level of these people is simply not going to be there, so the question is how can governments respond to it,” pollster John Wright said.

CFIB president Dan Kelly hailed the federal government’s announcement of a wage subsidy – which will be at a maximum of $847 per week – as a vital component of keeping the small business sector liquid.

“Putting in place a 75% wage subsidy was terrific news and we are already hearing from business owners who have delayed layoffs as a result,” Kelly told BNN Bloomberg in an interview.

Fully 68% of the respondents to the CFIB surveyed welcomed the subsidy.

“Stress among business owners is very high and it’s critical that the wage subsidy and other measures are accessible to as many businesses as possible to avoid a flood of permanent closures in the weeks and months to come,” Kelly added.  By Ephraim Vecina.

Mortgage Interest Rates

On April 2nd the Bank of Canada’s target overnight rate dropped a third time since the health and economic crisis and is now 0.25%.  Prime lending rate is now down to 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers. The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval lowered to 5.04% adding on average another $10,000 in increased borrowing capacity, but changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. 

Banks/Lenders started raising fixed rates due to market volatility and and liquidity concerns.  Discounts on variable rates have also been reduced now at Prime plus. Bond markets are not operating as normal and lenders cost for hedging funds has become more expensive also affecting rates.

View rates Here – and be sure to contact us for a quote as rates are moving faster than can be updated.

Mortgage rates to climb further as institutional lenders react to increased risk

Greater risk on the part of financial institutions is the major element driving the recent sharp increases in mortgage rates for new loans, Dominion Lending Centres chief economist Sherry Cooper said.

“These disruptive forces of COVID-19 have markedly reduced the earnings of banks and other lenders and dramatically increased their risk,” Cooper wrote in an analysis recently published by DLC’s online portal.

“That is why the stock prices of banks and other publically-traded lenders have fallen very sharply, causing their dividend yields to rise to levels well above government bond yields,” she added. “Thus, the cost of funds for banks and other lenders has risen sharply despite the cut in the Bank of Canada’s overnight rate.”

The economic shockwaves emanating from the pandemic have proven disastrous, with industry players bearing the brunt of the impact so far.

“The banks are having to set aside funds to cover rising loan loss reserves, which exacerbates their earnings decline,” Cooper explained. “An unusually large component of Canadian bank loan losses is coming from the oil sector. Still, default risk is rising sharply for almost every business, small and large–think airlines, shipping companies, manufacturers, auto dealers, department stores, etc.”  By Ephraim Vecina. 

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Your Mortgage

If you have concerns about your mortgage and the rapidly changing market, please contact us to discuss your needs, concerns and options in detail to protect your best interest.

Ensure that your current mortgage is performing optimally, or if you are shopping for a mortgage, only finalize your decision when you are confident you have all the options and the best deals with lowest rates for your needs.

Here at iMortgageBroker, we love looking after our clients’ needs to ensure you get all the options and the best deals and best results.  We do this by shopping your mortgage to all the lenders out there that includes banks, trust companies, credit unions, mortgage corporations & insurance companies.  We do this with a smile, and with service excellence!

Reach out to us – let us do all the hard work in getting you the best results and peace of mind!

We encourage you to follow guidelines from our public health authorities:

Middlesex Health Unit

https://www.healthunit.com/novel-coronavirus

Southwestern Public Health

https://www.swpublichealth.ca/content/community-update-novel-coronavirus-covid-19

Ontario Ministry of Health

https://www.ontario.ca/page/2019-novel-coronavirus

Public Health Canada

https://www.canada.ca/en/public-health/services/diseases/coronavirus-disease-covid-19.html

Factual Statistics Coronavirus COVID-19 Globally:

https://www.worldometers.info/coronavirus/

https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

8 Apr

TO DEFER or NOT TO DEFER

General

Posted by: Adriaan Driessen

That is the question.

With so many people being temporarily laid off due to the COVID-19 Pandemic that also triggered an economic crisis, many Canadians are finding themselves in a financial pinch to keep up with expenses and fixed liabilities like mortgage payments, loan payments and credit payments.The Majority of lenders and banks are offering temporary relief with deferred payments on mortgages, loans and credit card payments up to 6 months, of course on a case-by-case basis subject to approval.

Many clients are asking for more resource to help understand the factors involved in whether they should consider a mortgage or other debt payment deferral if they are temporarily out of work and unable to make payments.  Others just want to know if they should jump on the opportunity even if they don’t’ really need it.

It is important to understand that borrowing money is not free, when it comes to lending the cost is principal and interest.  A deferred payment is not a forgiven payment.  Also free money being printed by the government and given to Canadians to help during the economic crisis like the Emergency Response Benefit, will impact us in the future with reduced purchasing power on goods and service, once inflation kicks in after the deflationary period.

Deferred payments on a loan contract that includes interest plus principal will result in interest being accrued.  That means the interest gets added to the loan and the loan amount compounds and grows larger.

Deferred payments are only recommend to avoid default.

If you are in financial distress and you are about to default on your mortgage payment, or other loans or debts – contact your lender for special arrangement to avoid default.  Once you default it will be reported to your credit and will have a negative impact in the future, resulting in higher interest rate and cost of borrowing in your mortgage payments when you have to renew or change your mortgage in the future.

If you can make your payments normally without deferral, that is definitely the recommenced way to go!  Should you experience financial distress, please visit my video blog article FINANCIAL DISTRESS MORTGAGE & FINANCES due to  CORONAVIRUS COVID-19 ECONOMIC IMPACT.

http://imortgagebroker.ca/mortgages/financial-distress-mortgage-finances-due-coronavirus-covid-19b-economic-impact/

Don’t’ hesitate to reach out to us to review your situation, review all the options available to you and help you understand and find the best solutions for your specific financing needs.

We are always here for you if you have any further questions or need assistance.

If you’d like to keep receiving timely, informative and relevant information or videos like this one, please hit the subscribe button below or sign up for my email newsletter at my website at http://imortgagebroker.ca/about/contact.

Thanks for your time and keep well!

2 Apr

RESIDENTIAL  MARKET UPDATE 

General

Posted by: Adriaan Driessen

Industry & Market Highlights 

Bank of Canada enacts another overnight rate cut

For the third time this month, the Bank of Canada cut to the overnight rate, this time slashing off 50 basis points to a new level of .025%. The Bank Rate is correspondingly 0.50% and the deposit rate is .025% percent.

In a press statement, the central bank said this “unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.”

The BoC also launched two programmes designed to address the economic chaos created by COVID-19: The Commercial Paper Purchase Program (CPPP) is designed to “alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses,” while the second initiative will have the BoC acquiring Government of Canada securities in the secondary market, beginning with a minimum acquisition of $5 billion per week across the yield curve.

“The program will be adjusted as conditions warrant, but will continue until the economic recovery is well underway,” the BoC said, adding that its balance sheet “will expand as a result of these purchases.” By Phil Hall.

Government introduces Canada Emergency Response Benefit to help workers and businesses. 

The Government of Canada is taking strong, immediate and effective action to protect Canadians and the economy from the impacts of the global COVID-19 pandemic. No Canadian should have to choose between protecting their health, putting food on the table, paying for their medication or caring for a family member.

To support workers and help businesses keep their employees, the government has proposed legislation to establish the Canada Emergency Response Benefit (CERB). This taxable benefit would provide $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic. The CERB would be a simpler and more accessible combination of the previously announced Emergency Care Benefit and Emergency Support Benefit.

The CERB would cover Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures. The CERB would apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).

Additionally, workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, would also qualify for the CERB. This would help businesses keep their employees as they navigate these difficult times, while ensuring they preserve the ability to quickly resume operations as soon as it becomes possible.

The EI system was not designed to process the unprecedented high volume of applications received in the past week. Given this situation, all Canadians who have ceased working due to COVID-19, whether they are EI-eligible or not, would be able to receive the CERB to ensure they have timely access to the income support they need.

Canadians who are already receiving EI regular and sickness benefits as of today would continue to receive their benefits and should not apply to the CERB. If their EI benefits end before October 3, 2020, they could apply for the CERB once their EI benefits cease, if they are unable to return to work due to COVID-19. Canadians who have already applied for EI and whose application has not yet been processed would not need to reapply. Canadians who are eligible for EI regular and sickness benefits would still be able to access their normal EI benefits, if still unemployed, after the 16-week period covered by the CERB.

The government is working to get money into the pockets of Canadians as quickly as possible. The portal for accessing the CERB would be available in early April. EI eligible Canadians who have lost their job can continue to apply for EI here, as can Canadians applying for other EI benefits.

Canadians would begin to receive their CERB payments within 10 days of application. The CERB would be paid every four weeks and be available from March 15, 2020 until October 3, 2020.

This benefit would be one part of the government’s COVID-19 Economic Response Plan, to support Canadian workers and businesses and help stabilize the economy by helping Canadians pay for essentials like housing and groceries, and helping businesses pay their employees and bills during this unprecedented time of global uncertainty.

March 25, 2020 – Ottawa, Ontario – Department of Finance Canada

https://www.canada.ca/en/department-finance/news/2020/03/introduces-canada-emergency-response-benefit-to-help-workers-and-businesses.html

Ontario Prohibits Gatherings of More Than Five People with Strict Exceptions

Stronger action required to stop the spread of COVID-19

The Ontario government is taking immediate and decisive action to further stop the spread of COVID-19 and protect the health and well-being of all Ontarians.

Based on the best advice of Ontario’s Chief Medical Officer of Health, the Ontario government is issuing a new emergency order under the Emergency Management and Civil Protection Act to prohibit organized public events and social gatherings of more than five people, effective immediately.

This order would not apply to private households with five people or more. It would also not apply to  operating child care centres supporting frontline health care workers and first responders provided the number of persons at each centre does not exceed 50 people. Funerals would be permitted to proceed with up to 10 people at one time.

“If we are going to stop the spread of COVID-19 now and keep our communities safe, we need to take extraordinary measures to ensure physical distancing,” said Premier Doug Ford. “I strongly encourage everyone to do the responsible thing and stay home unless absolutely necessary. I can assure everyone that we will do everything in our power to stop this virus in its tracks.”

“We are acting on the best advice of our Chief Medical Officer of Health and other leading public health officials across the province,” said Christine Elliott, Deputy Premier and Minister of Health. “These are extraordinary times that demand extraordinary measures to stop the spread of COVID-19 and protect our people. Nothing is more important.”

Organized public events include parades, events including weddings, social gatherings and communal services within places of worship. This order replaces a previous emergency order which prohibits organized public events of over 50 people.

Ontario declared a provincial state of emergency on March 17, 2020 and has issued orders to close non-essential workplaces, recreational programs, libraries, publicly funded schools, private schools, daycares, provincial parks, churches and other faith settings, as well as bars and restaurants, except those that may only offer takeout or delivery. Essential services, such as grocery stores, convenience stores, pharmacies, public transit, manufacturing facilities, and supply chain companies remain open and operational.

Quick Facts

  • Everyone in Ontario should be practicing physical distancing to reduce their exposure to other people. Avoid close contact (within 2 metres) with people outside of your immediate families.
  • On March 25, 2020, the federal government announced an Emergency Order under the Quarantine Act that requires any person entering Canada by air, sea or land to self-isolate for 14 days whether or not they have symptoms of COVID-19. They should monitor for symptoms of COVID-19 for 14 days.
  • Take everyday steps to reduce exposure to COVID-19 and protect your health: wash your hands often with soap and water or alcohol-based hand sanitizer; sneeze and cough into your sleeve; avoid touching your eyes, nose or mouth; avoid contact with people who are sick; stay home if you are sick.

Additional Resources

https://news.ontario.ca/opo/en/2020/03/ontario-prohibits-gatherings-of-five-people-or-more-with-strict-exceptions.html

Pent up housing demand during COVID-19 may lead to hot summer market

As Canada prepares to weather the worst of the COVID-19 pandemic, there are already hopeful signs emerging from China where the novel coronavirus originated months ago.

China is maintaining a long streak of reporting no new local COVID-19 infections as its economy is gradually ramping back up after coming to a screeching halt earlier in the year. With it, the Chinese housing market is experiencing a sharp rebound in March, in what could be a bellwether for anticipating Canada’s own market trajectory once the pandemic’s impact subsides in the country.

“China’s private housing market is springing back to life as more sales offices reopened across the country following a nationwide shutdown, saving home builders from a deeper financial slump this year,” wrote South China Morning Post reporter Iris Ouyang in an article published today.

Ouyang cited home transaction volume in eight large Chinese cities that has eclipsed levels observed in the final quarter of 2019. She also noted that property sales in 30 tier-1 and tier-2 Chinese cities tripled in March from February, a sign that the coronavirus crisis was waning. South China Morning Post uses a four-tier system to rank cities in China using GDP, population and political governance data.

“There’s a release of pent-up demand from the Spring Festival and the coronavirus lockdown period in February,” Yang Hongxu of E-House China Research and Development Institute, a Shanghai-based real estate research firm, told South China Morning Post. “Thus we are seeing partial warming up of the property market.”

While nothing can be guaranteed during these extraordinary times, many economists believe that the experience of China and other Asian countries that were first hit by the virus early in the year will largely mirror the experience of Western countries now facing the full brunt of their outbreaks.

“If the dynamics seen in Asia repeat (and we have reason to believe it will) we are about 3 to 4 weeks away from the global pandemic inflection point,” wrote Tamara Basic Vasiljev, senior economist at Oxford Economics, in a research note published today.

“True, the numbers of coronavirus cases continue to rise sharply and western economies have been unable to repeat the success of Asian quarantine and containment policies. But the dynamics of COVID-19 deaths in the West are similar to patterns seen in Asia, pointing to a near turnaround,” she continued.

When this turning point is reached in Canada and new infections begin to ebb, there is promise that pent up housing demand in the country’s major markets will be unleashed in the second half of the year.

The conditions are certainly right for a reinvigorated market in the summer and fall. BMO economist Priscilla Thiagamoorthy wrote earlier this month that Canada’s housing market “found a solid footing in the first couple of months of 2020” before being derailed by the unprecedented disruptive effects of the COVID-19 pandemic.

In response to the pandemic’s wide-ranging economic impacts, the Bank of Canada slashed its key interest rate to a historic low last week.

With strong housing demand in the months prior to the pandemic and all-time low mortgage rates expected when Canada emerges on the other side of its COVID-19 crisis, there are plenty of reasons to expect a housing rebound in the subsequent months.

China is seemingly following this trajectory as its outbreak wanes, bolstering the case further that Canada’s market could bounce back rapidly if it follows the same path. By Sean MacKay. 

Economic Highlights

Bank of Canada Moves to Restore “Financial Market Functionality”

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic (see chart below).

Strains in the commercial paper and government securities markets triggered today’s action to engage in quantitative easing. The Governing Council has been meeting every day during the pandemic crisis. Market illiquidity is a significant problem and one the Bank considers foundational. These large-scale purchases of financial assets are intended to improve the functioning of financial markets.

Credit risk spreads have widened sharply in recent days. People are moving to cash. Liquidity has dried up in all financial markets, even government-guaranteed markets such as Canadian Mortgage-Backed securities (CMBs) and GoC bills and bonds. The commercial paper market–used by businesses for short-term financing–has become nonfunctional. The Bank is making large-scale purchases of financial assets in illiquid markets to improve market functioning across the yield curve. They are not attempting to change the shape of the curve for now but might do so in the future.

These large-scale purchases will create the liquidity that the financial system is demanding so that financial intermediation can function. Risk has risen, which creates the need for more significant cash injections.

At the press conference today, Senior Deputy Governor Wilkins refrained from speculating what other measures the Bank might take in the future. When asked, “Where is the bottom?” She responded, “That depends on the resolution of the Covid-19 health issues.”

The Bank will discuss the economic outlook in its Monetary Policy Report at their regularly scheduled meeting on April 15. In response to questions, Governor Poloz said it is challenging to assess what the impact of the shutdown of the economy will be. A negative cycle of pessimism is clearly in place. The Bank’s rate cuts help to reduce monthly payments on floating rate debt. He is hoping to maintain consumer confidence and expectations of a return to normalcy.

The oil price cut alone would have been sufficient reason for the Bank of Canada to lower interest rates. The Covid-19 medical emergency and the shutdown dramatically exacerbates the situation. All that monetary policy can do is to cushion the blow and avoid structural problems to the economy. The overnight rate of 0.25% is consistent with market rates along the yield curve.

High household debt levels have historically been a concern. Monetary policy easing helps to bridge the gap until the health concerns are resolved. The housing market, according to Wilkins, is no longer a concern for excessive borrowing by cash-strapped households.

At this point, the Bank is not contemplating negative interest rates. Monetary policy has little further room to maneuver, given interest rates are already very low. With businesses closed, lower interest rates do not encourage consumers to go out and spend money.

Large-scale debt purchases by the Bank will continue for an extended period to provide liquidity. The Bank can do this in virtually unlimited quantities as needed. The policymakers are also focussing on the period after the crisis. They want the economy to have an excellent foundation for growth when the economy resumes its normal functioning.

Fiscal stimulus is crucial at this time. The newly introduced income support for people who are not covered by the Employment Insurance system is a particularly important safety net for the economy. There are many other elements of the fiscal stimulus, and the government stands ready to do more as needed.

The Canadian dollar has moved down on the Bank’s latest emergency action. The loonie has also been battered by the dramatic decline in oil prices. Canada is getting a double whammy from the pandemic and the oil price war between Saudi Arabia and Russia. The loonie’s decline feeds through to rising prices of imports. However, the pandemic has disrupted trade and imports have fallen.

The Bank of Canada suggested as well that they are meeting twice a week with the leadership of the Big-Six Banks. The cost of funds for the banks has risen sharply. CMHC is buying large volumes of mortgages from the banks, which, along with CMB purchases by the central bank, will shore up liquidity. The banks are well-capitalized and robust. The level of collaboration between the Bank of Canada and the Big Six is very high.

The Stock Market Has Had Three Good Days

As the chart below shows, the Toronto Stock Exchange has retraced some of its losses in the past three days as the US and Canada have announced very aggressive fiscal stimulus. As well, the Bank of Canada has now lowered interest rates three times this month, with a cumulative easing of 1.5 percentage points. The Federal Reserve has also cut by 150 basis points over the same period. In addition to lowering borrowing costs, the central bank has also announced in recent days a slew of new liquidity measures to inject cash into the banking system and money markets and to ensure it can handle any market-wide stresses in the financial system.

The economic pain is just getting started in Canada with the spike in joblessness and the shutdown of all but essential services. Similarly, the US posted its highest level of initial unemployment insurance claims in history–3.83 million, which compares to a previous high of 685,000 during the financial crisis just over a decade ago.

These are the earliest indicator of a virus-slammed economy, with much more to come. All of this is without precedent, but rest assured that policy leaders will continue to do whatever it takes to cushion the blow of the pandemic on consumers and businesses and to bridge a return to normalcy.

By Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres.

Millions of Canadians already missing payments due to COVID-19

We are still relatively early in the coronavirus crisis but already many people are missing payments.

A new report from insolvency practitioners Bromwich+Smith with Leger Research has found that 49% of households in Ontario and Alberta, and more than half in British Columbians, have suffered an immediate income reduction since the crisis began.

The share of households who reported already falling behind with payments on credit cards, utilities, or telecoms is 24% in Alberta, and 19% in Ontario and BC.

“The results are quite staggering really. Of course, we get a sense of what is happening when we read the news, but the survey results make it far more real having interviewed 750 people across BC, Alberta and Ontario,” says David de Lange, Senior Vice President of Leger Research.

Getting help

Most of those struggling will reach out for help from the federal and provincial governments but almost a quarter of respondents said they didn’t know how they would adjust to a reduction in income.

Bromwich+Smith advises that getting government help is a good first step for those that cannot pay their debts followed by asking their mortgage lender to see if a deferral could work for them or call a licensed insolvency trustee to understand if restructuring debts makes sense for their current state. By Steve Randall.

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Mortgage Interest Rates

The Bank of Canada’s target overnight rate is now 0.25%.  Prime lending rate is now down to 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers. The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval lowered to 5.04% adding on average another $10,000 in increased borrowing capacity, but changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. 

Banks/Lenders started raising fixed rates due to market volatility and and liquidity concerns.  Discounts on variable rates have also been reduced now at Prime plus. Bond markets are not operating as normal and lenders cost for hedging funds has become more expensive also affecting rates.

View rates Here – and be sure to contact us for a quote as rates are moving faster than can be updated.

Why Are Mortgage Rates Rising?

Over the past month, the Bank of Canada has lowered its overnight rate by a whopping 1.5 percentage points to a mere 0.25%. Many people expected mortgage rates to fall equivalently. The banks have reduced prime rates by the full 150 basis points (bps). But, since the second Bank of Canada rate cut on March 13, banks and other lenders have hiked mortgage rates for fixed- and variable-rate loans. That’s not what happens typically when the Bank cuts its overnight rate. But these are extraordinary times.

The Covid-19 pandemic has disrupted everything, shutting down the entire global economy and damaging business and consumer confidence. No one knows when it will end. This degree of uncertainty and the risk to our health is profoundly unnerving.

Most businesses have ground to a halt, so unemployment has surged. Hourly workers and many of the self-employed have found themselves with no income for an indeterminate period. All but essential workers are staying at home, including vast numbers of students and pre-school children. Nothing like this has happened in the past century. The societal and emotional toll is enormous, and governments at all levels are introducing income support programs for individuals and businesses, but so far, no cheques are in the mail.

In consequence, the economy hasn’t just slowed; it has frozen in place and is rapidly contracting. Travel has stopped. Trade and transport have stopped. Manufacturing and commerce have stopped. And this is happening all over the world.

What’s more, the Saudis and Russians took advantage of the disruption to escalate oil production and drive down prices in a thinly veiled attempt to drive marginal producers in the US and Canada out of business. This has compounded the negative impact on our economy and dramatically intensified the plunge in our stock market.

Many Canadians are now forced to live off their savings or go into debt until employment insurance and other government assistance kicks in, and even when it does, it will not cover 100% of the income loss. The majority of the population has very little savings, so people are resort to drawing on their home equity lines of credit (HELOCs), other credit lines or adding to credit card debt. Businesses are doing the same.

The good news is that people and businesses that already have loans tied to the prime rate are enjoying a significant reduction in their monthly payments. All of the major banks have reduced their prime rates from 3.95% to 2.45%. So people or businesses with floating-rate loans, be they mortgages or HELOCs or commercial lines of credit, have seen their monthly borrowing costs fall by 1.5 percentage points. That helps to reduce the burden of dipping into this source of funds to replace income.

So Why Are Mortgage Rates For New Loans Rising?

These disruptive forces of Covid-19 have markedly reduced the earnings of banks and other lenders and dramatically increased their risk. That is why the stock prices of banks and other publically-traded lenders have fallen very sharply, causing their dividend yields to rise to levels well above government bond yields. As an example, Royal Bank’s stock price has fallen 22% year-to-date (ytd), increasing its annual dividend yield to 5.31%. For CIBC, it has been even worse. Its stock price has fallen 30%, driving its dividend yield to 7.66%. To put this into perspective, the 10-year Government of Canada bond yield is only 0.64%. The gap is a reflection of the investor perception of the risk confronting Canadian banks.

Thus, the cost of funds for banks and other lenders has risen sharply despite the cut in the Bank of Canada’s overnight rate. The cheapest source of funding is short-term deposits–especially savings and chequing accounts. Still, unemployed consumers and shut-down businesses are withdrawing these deposits to pay the rent and put food on the table.

Longer-term deposits called GICs, which stands for Guaranteed Investment Certificates, are a more expensive source of funds. Still, owing to their hefty penalties for early withdrawal, they become a more reliable funding source at a time like this. As noted by Rob Carrick, consumer finance reporter for the Globe and Mail, “GIC rates should be in the toilet right now because that’s what rates broadly do in times of economic stress. But GIC rates follow a similar path to mortgage rates, which have risen lately as lenders price rising default risk into borrowing costs.”

To attract funds, some of the smaller banks have increased their savings and GIC rates. For example, EQ Bank is paying 2.45% on its High-Interest Savings Account and 2.55% on its 5-year GIC. Other small banks are also hiking GIC rates, raising their cost of funds. Rob McLister noted that “The likes of Home Capital, Equitable Bank and Canadian Western Bank have lifted their 1-year GIC rates over 65 bps in the last few weeks, according to data from noted housing analyst Ben Rabidoux.”

The banks are having to set aside funds to cover rising loan loss reserves, which exacerbates their earnings decline. An unusually large component of Canadian bank loan losses is coming from the oil sector. Still, default risk is rising sharply for almost every business, small and large–think airlines, shipping companies, manufacturers, auto dealers, department stores, etc.

Lenders have also been swamped by thousands of applications to defer mortgage payments.

Hence, confronted with rising costs and falling revenues, the banks are tightening their belts. They slashed their prime rates but eliminated the discounts to prime for new variable-rate mortgage loans. Some lenders will no doubt start charging prime plus a premium for such mortgage loans. Banks have also raised fixed-rate mortgage rates as these myriad pressures reducing bank earnings are causing investors to insist banks pay more for the funds they need to remain liquid.

An additional concern is that financial markets have become less and less liquid–sellers cannot find buyers at reasonable prices. The ‘bid-ask’ spreads are widening. That’s why the central bank and CMHC are buying mortgage-backed securities in enormous volumes. That is also why the Bank of Canada has started large-scale weekly buying of government securities and commercial paper. These government entities have become the buyer of last resort, providing liquidity to the mortgage and bond markets.

These markets are crucial to the financial stability of Canada. Large-scale purchases of securities are called “quantitative easing” and have never been used before by the Bank of Canada. It was used extensively by the Fed and other central banks during the 2008-10 financial crisis. When business and consumer confidence is so low that nothing the central bank can do will spur investment and spending, they resort to quantitative easing to keep financial markets functioning. In today’s world, businesses and consumers are locked down, and no one knows when it will end. With so much uncertainty, confidence about the future diminishes. The natural tendency is for people to cancel major expenditures and hunker down.

We are living through an unprecedented period. When the health emergency has passed, we will celebrate a return to a new normal. In the meantime, seemingly odd things will continue to happen in financial markets.  By Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres.

Your Mortgage

If you have concerns about your mortgage and the rapidly changing market, please contact us to discuss your needs, concerns and options in detail to protect your best interest.

Ensure that your current mortgage is performing optimally, or if you are shopping for a mortgage, only finalize your decision when you are confident you have all the options and the best deals with lowest rates for your needs.

Here at iMortgageBroker, we love looking after our clients’ needs to ensure you get all the options and the best deals and best results.  We do this by shopping your mortgage to all the lenders out there that includes banks, trust companies, credit unions, mortgage corporations & insurance companies.  We do this with a smile, and with service excellence!

Reach out to us – let us do all the hard work in getting you the best results and peace of mind!

For Continued Updates on The COVID-19 Pandemic, please visit:

Middlesex Health Unit

https://www.healthunit.com/news/novel-coronavirus

Ontario Health

https://www.ontario.ca/page/2019-novel-coronavirus

Government Canada Public Health

https://www.canada.ca/en/public-health/services/diseases/coronavirus-disease-covid-19.html

World Health Organization: 

https://www.who.int/emergencies/diseases/novel-coronavirus-2019

Factual Statistics Coronavirus COVID-19 Global Cases

https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

https://www.youtube.com/watch?v=qgylp3Td1Bw&app=desktop