9 Dec



Posted by: Adriaan Driessen

Industry & Market Highlights 

Average home price in London, ON rises in November

Home prices in London, ON have risen in November, according to data from the London St. Thomas Association of Realtors (LSTAR).

LSTAR revealed that the average home price in London was $416,116 in November, up 10.6% compared to November 2018. Broken down by area, the average home price in London East was $357,796, up 18.6% from last November. In London South (which includes data from the west side of the city), the average home sales price was $424,900, up 12.2% compared to the previous year, while London North saw an increase of 1.9% over last November, with an average home sales price of $493,896.

“We had another solid month, demonstrating the robust marketplace all across the region,” said Earl Taylor, president of LSTAR. “There have been 9,658 home resales year to date, which is up 3.2% compared to the same period in 2018, and we’re on course to surpass last year’s total sales.”

The sales-to-new listings ratio in LSTAR’s jurisdiction was 90.7%, which the Canadian Real Estate Association (CREA) says favours sellers. A ratio between 40% and 60% is generally consistent with a balanced market. A ratio below 40% tends to favour buyers, while a ratio higher than 60% indicates marketplace conditions favouring sellers, according to CREA.

“Several regions saw sales-to-new listings ratios above 100%, including London East (105.6%) and Strathroy (107.1%),” said Taylor. “We’re still experiencing low inventory levels, which also continues to impact the average home sales price in all regions.”  By Duffie Osental. 

Buying or selling? Here’s what you need to know about new real estate rules

The Ontario government recently announced plans to change the rules in the real estate industry in Ontario. The proposed changes are fairly broad, and will impact several areas, some in particular will impact you directly as the consumer.

The Real Estate Council of Ontario (RECO), is mandated by the Government of Ontario to protect consumers who buy and sell their properties through brokerages registered to trade in Ontario. RECO is here to assist you with what these proposed changes mean to you as a consumer.

If you received this from your real estate salesperson, then that’s a good sign, because you are already talking to a real estate professional who has your interests as a consumer at heart.

What are the most important changes?

There are many important reforms in the legislation that will improve protection for Ontario’s buyers and sellers. Here are a few highlights:

  • Adding clarity for buyers and sellers so that they know whether they are represented by a brokerage, or if they are self represented;
  • Requiring new disclosures to buyers and sellers to support informed decisions;
  • Additional regulatory powers that will give RECO more tools to get the worst offenders in the industry out of the business; and
  • Making it easier for RECO to levy fines against real estate salespeople for certain violations of the legislation.

What won’t change is RECO’s mandate. We remain committed to protecting Ontario consumers, and the integrity of the marketplace.

I’m in the process of buying or selling, how does this impact me?

The current laws already offer robust protection for you as a consumer, and thousands of sales occur every month in Ontario with no problem at all. It is important that you understand exactly what duties your brokerage owes you, and what your responsibilities are too, under the arrangement that has been established.

Why did the government introduce this legislation?

It is usual that the Government reviews its laws on a regular basis to ensure that they remain up to date and relevant. The real estate industry has evolved in many ways since 2006 when the last significant changes were made, so it was time to revisit the laws. RECO is pleased that there are many proposed changes that enhance consumer protection, and we recognize that other changes will strengthen the business environment in the real estate industry, and also cut some of the red tape.

What happens next, and when do the new rules come into effect?

It can take a while for the rules and laws to change through the legislative process, so the simple answer is that there are several steps that need to take place before the rules actually change. It is also possible that the proposed rules may be amended through the process. The new rules could come into effect as early as 2021.


How can I stay informed?

RECO’s website is a great resource for staying up-to-date on developments with the Trust in Real Estate Services Act, 2019.

Share this link with your clients or download the PDF here.

National housing market now characterized by more balanced conditions

Despite a modest degree of vulnerability remaining, the Canadian residential market is now exhibiting “much narrow imbalances,” according to the federal housing agency.

A new quarterly report by Canada Mortgage and Housing Corp. stated that the average housing price nationwide ticked down by 0.6% annually during Q2 2019. Meanwhile, the population of young adults expanded by 1.9% during the same time frame, boosting the number of potential first-time home buyers.

For the third consecutive quarter, CMHC cited “moderate” risk for the national market. This was after around two and a half years of “high” risk ratings, The Canadian Press reported.

Breaking down by markets, Toronto has been moved from “high” to “moderate” risk, with prices declining by 0.8% and inflation-adjusted disposable income gaining 0.5% during the second quarter.

Hamilton was similarly moved from “high” to “moderate” vulnerability, while Vancouver, Calgary, Edmonton, Saskatoon, Regina, and Winnipeg all retained their “moderate” risk ratings.

“Low” risk markets include Ottawa, Montreal, Quebec, Moncton, Halifax, and St. John’s, CMHC noted.

Last week, the Crown corporation argued that stricter mortgage regulations are a major component of Canadian housing’s current stability. Low default rates and slower residential mortgage growth will also alleviate the worst effects of market weakness.

More importantly, these trends give credence to the Bank of Canada’s latest decision to hold its interest rates. Keeping rates flat would prevent a “resurgence” of credit, which has been previously cited by the central bank as a significant economic risk.  By Ephraim Vecina.

Changes Are Coming to Tarion Warranty Corporation. How will they affect Ontario investors?

When it was released to the public in October, the Office of the Auditor General of Ontario’s Special Audit of the Tarion Warranty Corporation surprised few when it called out the non-profit for its ongoing failure in assisting homeowners in their warranty disputes with the province’s homebuilders.

The audit called Tarion to task over several areas of concern, from the corporation’s close relationship with the Ontario Home Builders Association to its unnecessarily tight schedule of deadlines, which have led to the denial of thousands of homeowner requests for help. Among some of the more damning information contained in the report, the Auditor General found that builders failed to fix defects under warranty in 65% of cases between 2014 and 2018, and that the compensation of Tarion’s senior management team depended on reducing operating costs – like those related to running Tarion’s call center.

The audit culminated in 32 recommended changes for Tarion, including:

  • Discontinuing Tarion’s monetary sponsorship to the Ontario Home Builders Association
  • Providing homebuyers more direct information on the importance of Pre-Delivery Inspections
  • Conducting random audits of builders to ensure compliance
  • Redefining “finished house” so a homeowner’s one-year warranty period begins only once the home meets this new definition
  • Removing the two 30-day deadlines imposed on homeowners to file a complaint against their homebuilders
  • Factoring builders’ poor warranty performances into licensing decisions
  • Multiple protections for new-build homebuyers who have purchased units in projects that may be delayed or cancelled

Tarion’s response has been predictably agreeable, with the corporation pledging to work toward implementing the audit’s recommendations.

“[W]e are taking several positive steps in the journey to build a better warranty program for our stakeholders,” Tarion said in its response to the report. “This includes improvements to our dispute resolution tools, additional disclosure on the Ontario Builder Directory and implementing targeted pre-possession inspections to improve the quality of new homes across the province.”

But few see these recommendations having much of an effect on buyers of new product, largely because of Tarion’s laughable track record thus far in helping homeowners and the conflict of interest inherent in having homebuilders call most of the shots for an organization that is meant to hold them accountable.

“I personally think Tarion is one of the most broken systems for consumer protection that there ever has been. I think it’s an embarrassment to Ontario,” says Simeon Papailias of Royal LePage Signature Realty, who read the report shortly after its release. “The findings are right in line with everybody’s experience. Consumers absolutely are disgusted by Tarion.”

“I never had any faith in Tarion whatsoever, and I maybe have marginally more faith now that some changes have been made,” says David Fleming of Bosley Real Estate. “There are just not enough resources, and not enough interest among Tarion and the builders they represent, to go ahead and actually remedy the issues.”

There are also concerns that any costs associated with Tarion reforms incurred by Ontario builders could eventually be passed on to homeowners.

“If these changes are going to make things more expensive, they are going to pass on one hundred percent of the cost to the consumers,” Fleming says. “What’s the alternative? They’re going to make less money? Never. Unless people stop buying.”

Papailias says that new-build investors hoping to avoid a dispiriting encounter with Tarion need to take their pre-delivery inspections more seriously. “People don’t even show up at their pre-delivery inspections because they don’t think they’re relevant, and it’s the most relevant part of your Tarion warranty,” he says.

Cynicism will rain down on Tarion until meaningful reforms are enacted. But Papailias feels there are better days ahead for investors forced to playing the new construction game with Tarion as a teammate.

“They can no longer hide when everything has been outed.”  By  Clayton Jarvis.

Consumer debt blues brighten slightly

Interest rates are stable and look poised to fall.  Inflation is in check.  The unemployment rate is at historic lows.  We are told wage growth is strong, and households appear to be reducing their debt-load.

Still, many Canadians are worried about making ends meet.

The latest quarterly survey by insolvency trustee MNP suggests 54% of Canadians have growing concerns about their ability to repay their debts.  The survey also suggests Canadians have a shrinking amount of money left at the end of the month.  Once all the bills are paid the average Canadian has $557.00 to spare.  That is down more than $140.00 from the last survey in June.  Nearly half of the respondents say they have less than $200.00 left at the end of the month.  Of that group, almost one-third say they do not make enough money to cover all of their obligations.

The MNP survey – which tries to track people’s attitudes about their finances – also indicates Canadians are little more upbeat about their situations.  Nearly a third say their finances are better than they were a year ago, up by three points.  And a similar number say things are better than they were five years ago, a two point increase.

For a growing portion of respondents the future looks even brighter.  Nearly 40% believe their debt situation will improve over the next year, up by three points.  Half believe things will get better over the next five years, also a three point jump.  By First National Financial.

5 things to know about Ontario’s new real estate act

The long-awaited changes to the real estate agent and brokerage community in Ontario just had its initial release, mostly to positive reviews from the industry. The draft bill to change the Real Estate and Business Brokers Act, 2002 has not yet been approved and contemplates further changes. The new act will be called the Trust in Real Estate Services Act, 2002. Here are the main points you need to know.

1. Real estate agents will be able to incorporate.

The real estate industry has been requesting this for years, so that real estate professionals could enjoy the same tax advantages of other professional groups such as doctors, lawyers and accountants. Incorporation should also provide extra protection from liability. Incorporation is not for everyone and once the rules are clarified, agents must discuss this with their own accountants to make sure that this is right for them. Still, great news.

2. No more customers, you are either a client or you are self-represented.

There has been a lot of confusion over the years in trying to explain to a member of the public as to whether they should become a client or customer of a real estate brokerage and the differences between the two. While there currently is a duty to be fair to customers, there was an extra level of care owed to clients. An agent can give advice to a client, not a customer. This is easier said than done. Under the proposed new rules, you are either a client of the brokerage, or you represent yourself. Makes it much simpler. Remember the old adage, “when you represent yourself, you have a fool for a client.” Applies in just about everything you do.

3. Multiple representation will still be permitted.

This is also great news for the industry. Real estate brokerages will still be able to represent both the buyer and the seller in the same deal. It is not clear whether the same agent will be permitted to act for both the buyer and the seller. This will also have to be reviewed more carefully when further clarification is provided.

4. Sellers may be able to disclose the highest price to a competing buyer.

It appears that in a bidding war, a seller may obtain the option to disclose to one of the other buyers the price that one of the buyers is willing to pay. This is currently not permitted today. Again, the actual language will have to be reviewed to determine the circumstances when this may occur.

5. Penalties are increasing if you break the rules.

It is proposed that fines to real estate agents and brokerages be increased to $50,000 for any agent to $100,000 for the brokerages if you violate the rules, including the REBBA 2002 Code of Ethics. This is just part of the new protections to give the public more assurance that real estate agents and brokerages are held to a higher professional standard.

By Mark Weisleder, REMOnline.com

Toronto unveils $23.4 billion housing plan

The City of Toronto has released a comprehensive housing blueprint to assist more than 341,000 households over the next decade.

The HousingTO 2020-2030 Action Plan provides 13 strategic actions that looks to address the “full continuum” of housing – including homelessness, social housing, rental housing, long-term care, and home ownership. Some of the highlights include a revised housing charter and the creation of a multi-sector land bank to support the approval of 40,000 new rental and supportive homes.

Implementation of the full plan over 10 years is estimated to cost governments $23.4 billion, with the city’s commitment through current and future investments being $8.5 billion.

Mayor John Torry said that he “will be working hard with the other orders of government to ensure the entire HousingTO Action Plan is fully funded”

“This has to be a priority — we have to come together to support households who are struggling to pay the rent and keep, or put a roof over their heads,” said Torry. “Ensuring that residents in our city have access to housing will benefit our entire city. It gives people the opportunity to meet their full potential and to participate in our city’s success. Together we can make a difference and make Toronto a place that anyone who wants to, can call home.”  By Duffie Osental. 

Economic Highlights

Housing and debt worries weigh on BoC

The Canadian economy continues to stubbornly support the Bank of Canada’s interest rate policy.  Market watchers are pretty much unanimous in their projections that the central bank will stay on the sidelines, again, when it makes its rate announcement later this week.

The latest numbers from Statistics Canada show gross domestic product grew by 1.3% in the third quarter.  That is a slow down, but it is a long way from anything that would trigger BoC intervention.  Consumer spending and housing are seen as the main drivers of that growth.

Housing has recovered nicely from its sluggish performance earlier this year and it would seem that the market has made a soft landing.   But the Bank continues to worry that lowering interest rates could spark another round of debt-fueled buying.  In the Bank’s opinion, high household debt remains a key vulnerability for the Canadian economy.

Of course an interest rate cut would weaken the relatively strong Canadian dollar which is hampering the export sector, but the Bank has said it would like to see other methods used to encourage exports and business investment.  Even lower interest rates and a weaker Loonie might not be enough to push through the international economic headwinds created by the current spate of tariff and trade wars that have slowed global growth.

Now the forecasters are looking as far ahead as the second quarter of 2020 before they see any interest rate activity.  By then we should being seeing the effects of the U.S. presidential election campaign. By First National Financial.

Rate cut pressure eases for BoC

The Bank of Canada still has a clear path to an interest rate cut, but now there is less pressure to go down that route.

The latest inflation numbers from Statistics Canada showed a 0.3% increase from September to October, with the annual average inflation rate holding steady at 1.9%.  Core inflation edged up slightly to 2.1% in October from 2.0% in September.  Core inflation, which is what the Bank of Canada watches, strips-out the cost of volatile items like food and fuel.  Mortgage interest costs and car insurance were two of the big drivers of inflation last month.

The other key influencer of Canadian interest rates also appears to have stabilized.  The U.S. Federal Reserve says it does not expect to be dropping its benchmark rate again this year.

At the end of last month the Fed trimmed another quarter point off its policy rate dropping it into the range of 1.5% to 1.75%.  The minutes of the Fed meetings – that were released at the same time – make it clear the Federal Open Market Committee (FOMC), which sets the rate, has little taste for further cuts.  The U.S. central bank has dropped its rate three times in 2019.

The current president of the United States has been pushing for negative interest rates, a la Europe, but there is little evidence the tactic is getting the desired results there. By First National Financial. 

Huge Decline in Jobs in November As Jobless Rate Surges

One month does not a trend make. Statistics Canada announced this morning that the country lost 71,200 jobs in November, the worst performance in a decade. What’s more, the details of the jobs report are no better than the headline. Full-time employment was down 38.4k, and the private sector shed 50.2k. The jobless rate also rose sharply, up four ticks (the most significant monthly jump since the recession), to 5.9%. Hours worked fell 0.3%, and remain an area of persistent disappointment—they’re now up just 0.25% y/y, much more muted than the 1.6% annual job gain.

The one area of strength was wages, with growth accelerating to match a cycle high at 4.5% y/y. But wages tend to lag the labour market cycle, so if this weakness is the start of something bigger, wages gains are likely to slow.

The monthly moves were soft, no matter how you slice them. Both full-time (-38.4k) and part-time employment (-32.8k) were down. Similarly, private sector employment (-50.2k) led the way, but self-employment (-18.7k) and the public sector (-2.3k) also saw net losses.

Until last month, we saw a long string of robust job reports in what is usually a very volatile data series, so a correction is not surprising. But this report appears to be more than a statistical quirk and belies the Bank of Canada’s statements this week that the Canadian economy remains resilient. Employment is still up 26k per month in 2019 to date consistent with a 1.6% y/y gain, and most of that comes from full-time work. And some of the drop in November reflected a decline in public administration jobs retracing October’s gain that might have been related to the federal election. Nevertheless, the 0.4 percentage point uptick in the jobless rate is the largest since the financial crisis in early 2009, and manufacturing jobs were down more than 50k over the past two months.

By industry, job declines were widespread in the month, with only 5 of 16 major sectors posting improvement. Net losses were shared across both the goods and service sectors. Manufacturing (-27.5k) shed jobs for a second month, and notable declines were seen in public administration (-24.9k, likely a reflection of post-election adjustment) and accommodation and food services (-11k).

By region, Ontario and PEI were the only provinces to manage job growth last month, with all others deeply in the red. Quebec stands out, shedding 45.1k net positions in a second monthly employment decline and pushing the unemployment up to 5.6% (from 5.0%; the largest monthly increase in nearly eight years). Quebec’s jobless rate is now equivalent to that in Ontario. Things were not much better out west: Alberta and B.C. both lost 18.2k net positions. In the case of the former, this was enough to send the unemployment rate up half a point, to 7.2%. Ontario bucked the trend, adding 15.4k net positions, just shy of erasing the prior month’s drop. Still, the unemployment rate in the province rose to 5.3% (from 5.0%), as more people joined the labour force. (See the table below.)

Job growth slowed in the second half of this year. Over that period, the average monthly job gain has been a paltry 5.9k compared to an average monthly gain of 24.4k over the past year. For private sector employment, the equivalent figure flipped into negative territory (-4.3k) for the first time in more than a year.

Bottom Line: Today’s report means that the Bank of Canada will be keeping an even more watchful eye on the jobs report. The year-on-year pace of net hiring has decelerated for three straight months now, driven in large part by a slowing pace of private-sector hiring. It seems a safe bet that even if we see some recovery in the coming months, the substantial gains of recent years are unlikely to be repeated.

The Bank of Canada has been emphasizing Canada’s economic resilience in its recent communications. One month of soft jobs data will hardly break that narrative, but coming after a modest October, it is not hard to imagine a hair more worry about the durability of growth. The bigger question is whether this weakness persists, and more importantly if it feeds into consumer spending behaviour and housing activity, the Bank’s key bellwethers.

We continue to believe that the BoC will cut rates in 2020, owing mainly to Canada’s vulnerability to trade uncertainty. The loonie sold off sharply on the employment news, particularly so because of the stronger-than-expected labour market report released this morning in the US.

Mortgage Update - Mortgage Broker London

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.19%.  Fixed rates are holding steady.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

13 Nov



Posted by: Adriaan Driessen

Industry & Market Highlights 

Mortgage business on the move

In an effort to fill in some of the gaps in the country’s housing market data Canada Mortgage and Housing Corporation has launched a new Residential Mortgage Industry report.  The agency says the report is designed to support “evidence-based policy and informed decision making within the housing finance sector.”

Not surprisingly the report confirms that Canada’s big banks have the vast majority of the country’s residential mortgage business with a 75% share.  The average mortgage is a little less than $221,000 and their delinquency rate is just 0.24%.

Credit Unions hold 14% of the market, with an average mortgage value of $151,000 and a delinquency rate of 0.17%.  Mortgage finance companies have 6% of the market, an average mortgage of $258,000 and a delinquency rate of 0.25%.

So called “alternative lenders” – mortgage investment companies (MIC) and private lenders – have a market share of just 1.0%, an average mortgage of $195,000 and a delinquency rate of 1.93%.

While the alternative lenders have the smallest slice of the pie many market watchers are concerned that their share is growing while overall mortgage origination have declined.

In 2018 the growth of mortgage originations hit its lowest level in 25 years.  At the same time mortgage investment companies (MICs) increased their share of originations, more than doubling their share of the mortgage stock.

Overall, 200 to 300 active MICs and private lenders held an estimated $13 billion to $14 billion of mortgages outstanding, up from $12 billion estimated for 2017 and $10 billion in 2016.

Tougher mortgage stress testing is seen as a key reason home buyers are moving to alternative lenders where the terms are easier, but more expensive.  CMHC says a culture shift from owning to renting helps explain the drop in mortgage originations.  Of course, that shift is likely a response to the tougher mortgage qualifying rules as well.  

By First National Financial.

Bank of Canada Holds Policy Rate Steady Amid Global Uncertainty

It is rare for the Bank of Canada and the US Federal Reserve to announce rate decisions on the same day, but today’s announcements highlight the stark differences in policy in the two countries. The Bank this morning announced they would maintain their target for the overnight rate at 1.75% for the eighth straight meeting. The Fed is widely expected to cut its target for the fed funds rate by another 25 basis points, taking it below the key rate in Canada for the first time since 2016. More than 30 central banks have cut interest rates in the past year and the Bank of Canada in today’s Policy Statement highlighted the weakening in the global economic outlook since the release of its July Monetary Policy Report (MPR).

In today’s MPR, the Bank revised down its forecast for global economic growth this year to below 3.0%, reflecting a downward revision in growth in the United States to 2.3% (from 2.5%), the Euro area (to 1.1% from 1.2%), oil-importing emerging market economies and the rest of the world. China’s growth pace remains at a 30-year low of 6.1%.

Trade conflicts and uncertainty are weakening the world economy to its slowest pace since the 2007-09 economic and financial crisis. The slowdown has been most pronounced in business investment and the manufacturing sector and has coincided with a contraction in global trade (Chart 1). Despite the manufacturing slowdown, unemployment rates continue to be near historic lows in many advanced economies, as growth in employment in service sectors has remained resilient.

Growth is projected to strengthen modestly to around 3.25% by 2021, with a pickup in some emerging-market economies (EMEs) more than offsetting slower growth in the United States and China.

Canada has not been immune to these developments. Commodity prices have fallen amid concerns about global demand. Despite this, the Canada-US exchange rate is still near its July level, and the Canadian dollar has strengthened against other currencies.

Growth in Canada is expected to slow in the second half of this year to a rate below its potential. This reflects the uncertainty associated with trade conflicts, the continuing adjustment in the energy sector, and the unwinding of temporary factors that boosted growth in the second quarter. Business investment and exports are likely to contract before expanding again in 2020 and 2021. At the same time, government spending and lower borrowing rates are supporting domestic demand, and activity in the services sector remains robust. Employment is showing continuing strength and wage growth is picking up, although with some variation among regions. Consumer spending has been choppy but will be supported by solid income growth. Meanwhile, housing activity is picking up in most markets. The Bank continues to monitor the evolution of financial vulnerabilities in light of lower mortgage rates and past changes to housing market policies.

Canadian Economy Boosted By Housing

The Canadian economy grew at a moderate pace over the past year, supported by a healthy labour market and the recent turnaround in housing. However, global trade conflicts and related uncertainty dampened business investment and export activities, and investment in the energy sector continued to decline. The impact on growth of both global headwinds and energy transportation constraints is expected to diminish, and the pace of economic expansion should gradually pick up in 2020 and 2021.

In 2020 and 2021, Canada’s economy is anticipated to grow near potential. Consumer spending is projected to increase at a steady pace, and housing activity to continue its ongoing recovery. Overall, investment and exports are anticipated to grow moderately. In the energy sector, investment is forecast to stabilize, and oil exports should improve as pipeline and rail capacity gradually expands.

In today’s MPR, the Bank states that housing resales have been catching up to underlying demand (see chart 7 from the MPR). Housing markets generally reflect regional economic conditions. Housing starts and resales have been particularly robust in Quebec and Ontario, where labour markets have been strong. These provinces will likely continue to be the main drivers of the growth in residential investment. In Alberta, where the oil industry is expected to stabilize, modest improvements in housing are expected. In British Columbia, residential investment has recovered in recent months and

should remain near current levels, reflecting the creation of new households.

Bottom Line

The dovish tone of today’s policy statement suggests that the Bank of Canada has become more cautious in its holding pattern amid a weakening global economy. The central bank “is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist,” policymakers led by Governor Stephen Poloz said in the statement. “In considering the appropriate path for monetary policy, the Bank will be monitoring the extent to which the global slowdown spreads beyond manufacturing and investment.”

The statement and the fresh batch of more pessimistic growth forecasts will raise questions about the central bank’s commitment to a neutral stance on rates, particularly in the face of global easing in many other countries that has made the Bank of Canada an outlier. If the Federal Reserve lowers its interest rates later today, as expected, the Bank of Canada would have the highest policy rate in the industrialized world.

It may well be that the Bank of Canada cuts rates early next year. Mitigating this prospect is that the Bank was more bullish on consumption and housing–fueled by the robust labour market. Another source of future growth is additional fiscal stimulus from Prime Minister Justin Trudeau’s newly elected Liberal government, which has promised to implement new spending and tax cuts next year. For now, the Bank is maintaining a neutral stance.  

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

Canadian Real Estate Reality Check

From a housing perspective, it was an interesting and enlightening 40 days leading up to Canada’s 2019 federal election. Justin Trudeau’s new mandate was far from a landslide win, resulting in a Liberal minority government at the helm. This means Liberals will need the support of the other parties to pass legislation. Could this prospect of collaboration be a saving grace for Canada’s housing?

One thing Canadians have agreed on is that housing affordability and the cost of living are a top priority. The question about which party would effectively address those concerns was largely up in the air, and it still is.

The new minority government could be just what Canada needs to pull it out of this housing quagmire, which only seems to have gotten muddier since the Liberals took power in 2015. The last four years have seen skyrocketing housing prices and rents rising in lockstep, while housing supply dwindles.

This story of unsustainable growth in parts of Ontario is offset by the turmoil in Western Canada, with Liberal policies taking the brunt of the blame for what’s happening in British Columbia, Alberta and Saskatchewan. Generally speaking, the Liberals haven’t had positive impacts on real estate – yet.

The solution to Canada’s housing woes, at least for the next four-year term (barring any political shake-ups, which could cut that short) might be found through collaboration.

The Conservatives and New Democrats laid out some seemingly solid plans to address the housing crisis in their 40-day campaign period, tabling changes to the mortgage stress test, a return of 30-year amortizations for first-time homebuyers (even though it’s likely that both of these policies would have only pushed prices up in the long run) and addressing housing supply. Meanwhile, the Liberals are largely planning to stay the course, much to the chagrin of many Canadians who have been hoping, if not praying, for real estate relief.

With that being said, Team Trudeau has made some moves on the housing front over the last four years.

The National Housing Strategy is one of the wins, established in 2017 to help reduce homelessness and increase the availability and quality of affordable housing, at a cost of $50 billion over 10 years. Trudeau also increased the amount first-time homebuyers can withdraw from their registered retirement savings plan, from $25,000 to $35,000. And let’s not forget about the First-Time Home Buyer Incentive, an interest-free government loan covering up to 10 per cent of a home’s price, to lower the mortgage payments.

On the questionable side of the Liberals’ 2019 campaign was their promise to boost the First-Time Home Buyer Incentive amount in Toronto and Vancouver, to offset the sky-high prices in these markets. But when the average home hovers around $800,000 and $1 million respectively, the First-Time Home Buyer Incentive isn’t much of an incentive. The Liberals have also tabled a one-per-cent speculation tax on vacant homes owned by foreigners, which could limit price growth. But in reality, this policy won’t have much impact on the average Canadian.

What the Liberals have failed to address entirely is the prohibitive mortgage stress test, which was implemented to put the brakes on Canada’s runaway housing markets. While it did help rein in unprecedented price growth in Toronto and Vancouver, the policy has come under scrutiny for being outdated and ultimately, a barrier to home ownership. I am 100 per cent supportive of responsible debt levels and policies to ensure that goal, but even with the recent modifications, the mortgage stress test is more hindrance than help.

Another gap in the Liberals’ platform is the issue of housing supply, which is at the crux of our affordability crisis. Between the lack of rental housing and supply of affordable housing and less incentive for developers to build new communities, Canada is experiencing a serious housing shortage. This is particularly true in Vancouver and Toronto, where the average cost of living continues to tick upward, and residents are left scrambling for affordable alternatives.

It seems to me that Trudeau needs a reality check, which may come from the Conservatives, NDP and Bloc Québécois. By taking the best proposals put forth by each party, perhaps a patchwork solution will be found. But the collaboration can’t stop at the federal level. Trudeau must work closely with provincial and municipal governments, as well as the private sector, to create more housing supply.

Many Canadians, especially millennials, new immigrants and those employed in the so-called “gig economy” feel home ownership is becoming less tangible by the day. While politicians of all stripes acknowledge the mounting urgency of affordable housing, few are offering any timely or compelling solutions.

Real estate is still one of the safest and most reliable financial investments for Canadians. As real estate professionals, it’s our duty to help prospective homebuyers navigate this tricky landscape. Outside of creating more supply and affordable housing, I urge governments to refrain from meddling with the private real estate market. History shows that whenever they do, the effects are mostly detrimental.

I urge Canada’s new government to work together to develop a national housing strategy that addresses all issues relating to affordability. The health of Canada’s housing is at stake.  By Christopher Alexander

Mortgage-free or diversity?

Canadians put a high priority on paying off their mortgage debt – sometimes maybe a little too high.

Paying off debt is always a good move.  Wanting to be mortgage free is a laudable goal.  Making it your only goal may not be as sound.

Traditionally paying off your mortgage as quickly as possible has been seen as one of the best routes to financial success.  Interest rates used to be higher.  Some will remember that nasty period in the ‘80s and ‘90s when they were in double digits.  Even the 5% and 6% rates in place just before the Great Recession make today’s rates seem cheap.  So it can make more sense to take your focus off of your home and mortgage and view them as part of a more diversified investment strategy.

Over the past 10 years stock markets have tended to deliver rates of return that are markedly higher than mortgage interest rates.  By diverting some money away from your mortgage you could invest through RSPs or TFSAs.  It has been shown that people who start investing when they are young end up wealthier later in life.

Of course markets do fluctuate and some people prefer the stability of the “guaranteed return” that comes with paying down a mortgage.  It is a form of enforced saving.  There is also a sense of security that comes with mortgage free home ownership in the case of job loss or a sudden drop in income.

There is also protection in diversification.  Because you have expenses that go beyond your mortgage, having a collection of smaller assets can be useful.  If money gets tight you could sell a lesser investment in order to pay other bills.

While it is never a bad plan to pay down your mortgage faster, it is always a good plan to diversify and spread around your assets and your risks.  As the old expression says, “Don’t put all your eggs in one basket.”  By First National Financial.

Toronto real estate ranked second-highest bubble risk in the world 

The real estate bubble risk in Toronto is the second-highest in the world, according to data from the UBS Global Real Estate Bubble Index 2019. Canada’s largest city has a risk of 1.86, which is second only to Munich, which has a risk of 2.01. Amsterdam and Hong Kong tie for third place with a risk of 1.84.

Vancouver still poses a threat with a risk of 1.61, although that is a modest drop from its assessment of 1.92 in 2018. Toronto also experienced a slight drop from its 2018 risk of 1.95, and even more from its 2017 bubble risk of 2.12.

The UBS Global Real Estate Bubble Index gauges the risk of a property bubble—defined here as the substantial and sustained mispricing of an asset—on the basis of patterns of property market excesses. Signs typically include a “decoupling” of prices from local incomes and rents and imbalances in the real economy, such as excessive lending and construction activity.

“Low affordability already poses one of the biggest risks to property values in urban centers. If employees cannot afford an apartment with reasonable access to the local job market, the attractiveness and growth prospects of the city in question drop,” write Head of Swiss & Global Real Estate Claudio Saputelli and Head of Swiss Real Estate Investments Matthias Holzhey in the report.

These drops are often followed by attempts to curb price appreciation through regulatory measures, what have served to correct the market in the most overheated cities in recent years. In fact, real prices in the top four ranking cities in the 2016 UBS Global Real Estate Bubble Risk Index have fallen on average by 10%.

Between 2000 and 2018 real home prices in the Canadian cities in the UBS Index (Vancouver and Toronto) rose consistently by more than 5% each year. But, the report reads, over the last four quarters, price growth has stalled.

“The introduction of taxes on foreign buyers, vacancy fees and stricter rent controls seem to have taken effect. While the average price level in Toronto has remained broadly unchanged from last year, prices in Vancouver are down by 7%,” the report reads. “Lower mortgage rates are supportive, but cannot outweigh lower economic growth.”

In other words, while homes are still overvalued, the housing frenzy seems to have come to a halt—for now.

In Toronto, home prices almost tripled between 2000 and 2017, and although measures have been put in place to address affordability, a major price correction seems unlikely in the near future due to factors such as a weakening Canadian dollar and low housing supply. In Vancouver, the growth rates have reversed from higher than 10% to -7% in just two quarters, and the market remains vulnerable to the slightest shift in demand. Regional housing supply in Vancouver is increasing, although prices are 75% higher than they were 10 years ago.

In both cities, the report states that favourable financing conditions are keeping home prices high, although affordability remains a key risk.

There are, however, several differences between today’s bubbles and those that destroyed the American housing market more than a decade ago, dragging parts of the world down with it. Currently, lending growth is on par with GDP growth, which is in contrast to the run-up to the Great Financial Crisis, when outstanding mortgage volumes increased up to 2.5% faster than GDP, according to the UBS report.

Toronto and Vancouver are the only cities in North America that have a high risk of having real estate bubbles; with the exception of Hong Kong, all other high-risk cities are in the Eurozone.  By by Kimberly Greene. 

Ownership registry to help stamp out money laundering in housing  

The creation of a beneficial ownership registry is one of the most effective ways to fight money laundering in Canadian real estate, according to Ontario Real Estate Association CEO Tim Hudak.

In a recent contribution to the Toronto Sun, Hudak noted that such a public database would make it easier to determine a property’s ownership, thus ensuring much improved transparency and accountability.

“It would allow law enforcement, tax authorities, media and everyday citizens to search for properties of corrupt officials, their families or people they may know who are involved in money-laundering crimes, and better connect money from criminal acts overseas to property purchased in Canada,” Hudak wrote.

Said system would compel companies, trusts, and partnerships to disclose beneficial owners, most particularly controlling shareholders and partners.

Fortunately, the infrastructure to readily implement such a registry is already in place, the OREA chief assured.

Teranet, the exclusive provider of Ontario’s online property search and registration, already operates one of the most advanced, secure and sophisticated land registration systems in the world. To add the Beneficial Ownership Registry to its current platform would be a smart move to further increase transparency in housing transactions.”

Hudak cited research by Transparency International Canada, which found that since 2008, more than $28.4 billion worth of homes in the GTA alone were bought by shell companies.

“The problem is we don’t know how much of this money comes from legitimate businesses and how much are anonymous front companies hiding laundered money,” he stressed. “What we do know is the dirty money coming into our housing market is competing against hard-working young families trying to buy homes — and that has to stop.”

Hudak’s comments mirrored those of former RCMP top investigator Henry Tso. Earlier this year, Tso warned that Canada’s justice system currently has significant loopholes – most notably, toothless prosecution, feeble sentencing, and insufficient resources for law enforcement – that promote the growth of fraud as a business.

“Currently, weak corporate transparency rules in Canada allow criminals to hide behind anonymous shell companies and wash large amounts of money through housing. That’s because shell companies are permitted to buy homes without disclosing the names of the beneficial owners — those who enjoy the benefits of ownership even though the title of the property is in someone else’s name,” Hudak stated.  By Ephraim Vecina

Economic Highlights

Canadian economy now feeling the heat of global pressures  

Latest Statistics Canada economic data indicated that Canada is not as impervious to global turmoil as initially thought.

“It also reinforces the Bank of Canada’s decision on Wednesday to keep rates unchanged for the eighth consecutive meeting, though policy makers signaled they are leaving the door open for a rate cut in December,” BNN Bloomberg reported.

In the wake of a flat GDP reading in July, the national economy’s 0.1% August growth was slower than expert predictions of 0.2%, “reinforcing the view the nation’s economy is showing signs of decelerating into the second half of the year,” the report added.

Despite the languid pace, fully 14 of 20 sectors grew during the month. Manufacturing accounted for the bulk of the August expansion, going up by 0.5%.

However, the 3.7% annual growth observed during the second quarter might deteriorate during Q3, StatsCan warned.

Fortunately, Canada can still expect greater consumer purchasing power in the near future, with the addition of almost 54,000 jobs in September. This far outstripped earlier expert predictions of just 7,500 new jobs, and accompanied a decline of the national unemployment rate to a near-record low of 5.5%.

CIBC World Markets Inc. chief economist Avery Shenfeld argued that on the whole, the Canadian economy can maintain its robustness against fluctuations in global trade currents through its healthy workforce growth.

“Canada’s labour market seems to have been vaccinated against the global economic flu going around,” Shenfeld wrote in a mid-October investor note, as quoted by Bloomberg. By Ephraim Vecina.

BoC has clearer path to a rate cut  

The Bank of Canada has remained – somewhat defiantly – on the sidelines yet again, but it is feeling the pressure to get back into the game and one obstacle has now been removed.

The bank held its benchmark rate at 1.75% for an eighth straight setting.  At the same time it has clearly signalled it may not be able to hold that line much longer.  In its quarterly Monetary Policy Report (MPR) the bank pointed directly at trade conflicts (such as the U.S. – China tariff war) as the key cause of a global economic slowdown.  Growth has fallen to its lowest level since the financial collapse in 2007.  Around the world more than 35 other central banks have already cut rates in an effort to keep growth from stopping altogether.

The U.S. Federal Reserve has made three cuts in the past several months.  That has boosted the strength of the Canadian dollar which makes the country’s exports more expensive on the world market.  Given that the central bank has been counting on more business investment and spending to pick up the economic slack as debt-burdened consumers switch from spending to saving and repaying their loans, headwinds for exports and business are unwelcome.

The BoC, however, is not concerned that a drop in interest rates will trigger a renewed frenzy of debt-funded consumer spending.  It is satisfied that the biggest component of household debt – mortgages – have been stabilized by the B-20 regulations.  And another big obstruction has been removed.  The federal election is over so the bank can operate without risking the appearance of political favouritism.  By First National Financial.

The Bank of Canada: What it is, what it does  

In an earlier commentary we took a look at what central banks are and what they do.  In this piece we focus on the Bank of Canada.

Like other central banks around the world the Bank of Canada has the broad responsibility for managing the economic and financial welfare of the country.

The Bank of Canada was founded in 1934 and it is relatively young by central bank standards.  In 1938 it became a Crown Corporation, which means it is owned by the federal government.  The bank is governed by legislation in the Bank of Canada Act which says the bank exists “to regulate credit and currency in the best interests of the economic life of the nation.”

There are three main ways the Bank of Canada shows up in our daily lives.

Monetary Policy is designed to preserve the value of money.  This is the part of the bank’s job that most people know about, because it gets the most coverage in the media.  The factor in monetary policy is managing inflation to keep it low, stable and predictable.

The bank’s main tool for managing inflation is interest rates.  The bank sets its Policy Rate eight times a year.  It is the rate large financial institutions are charged when they borrow money from the Bank of Canada, or each other, to settle their daily accounts.  The Policy Rate is also known as the “overnight” rate.

Financial institutions base their interest rates on the Policy Rate.  As it goes up or down so do the rates for business and consumer borrowing such as variable rate mortgages, lines of credit and car loans.  Raising interest rates makes borrowing and spending more expensive which slows down economic activity and inflation.  Lowering rates does the opposite.

The Policy Rate can also influence the value of our dollar which affects the cost of Canadian goods and services on world markets.  Higher interest rates tend to increase the value of the Canadian dollar, making Canadian goods more expensive which, again, slows economic activity and inflation.

So, you can see the bank is performing an economic balancing act.

The Bank of Canada is known as “the banker’s bank” and it helps manage and regulate the country’s Financial System.  The bank facilitates borrowing and investing for Canada’s large financial institutions and it regulates those institutions.  The bank controls how much they can lend out by setting standards for how the loans are secured and imposing cash reserve requirements.

The most obvious way the Bank of Canada enters our lives is through our Currency.  The bank is responsible for designing, issuing and delivering bank notes (coins are the responsibility of the Royal Canadian Mint).  By First National Financial. 

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is at 5.19%.  Fixed rates moved up slightly.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

27 Sep



Posted by: Adriaan Driessen

Industry & Market Highlights 
Canadians are smarter that that
The liberal government has been very disruptive to the real estate and mortgage industry, and has severely negatively affected the economic prosperity of most Canadians.  First the Liberal Government created lending rules that were not in the best interest of Canadians, and now in the months leading up to a new elections they bring about a “pseudo benefit” for first time buyers.  As if that is not blatant enough now this…: “If you don’t vote for us, there’s nothing to help you.’’ 
‘It is not free money’: Canada’s new homebuyers’ incentive program is not for everybody  
Here’s a look through the fine print of the program, along with some tips for Canadians looking to purchase their first house.  Nicole Wells, RBC’s vice-president of Home Equity Financing, goes through the fine print of the new homebuyers’ incentive program with the Financial Post’s Larysa Harapyn and offers tips for Canadians looking to buy their first home.  By Vanouver Sun.  View the Video Here. 
Pressure mounts on federal parties to amend B-20 ahead of election 
With the October 21 federal election around the corner, real estate boards across Canada are calling on all federal parties to significantly alter B-20.
“In its current form, the stress test in the GTA adds about $700 a month to the average mortgage, which is a good chunk that could be used for daycare or a car payment, and to add that burden on a family when they’re trying to buy a house is too much,” Toronto Real Estate Board President Michael Collins told MortgageBrokerNews.ca. “We think there is some benefit to the stress test, but we’d like to see it reduced so that it’s more prudent.”
In addition to TREB, boards from Calgary, Vancouver and Quebec, representing some 90,000 realtors, are calling for 30-year amortizations, replacing the $750 First-Time Home Buyers Tax Credit with a $2,500 non-refundable tax credit for Canadians buying their first homes, and adjust the stress test according to economic headwinds and interest rate environments.
Collins added that the boards would like to B-20 implemented regionally rather nationally.
“Again, we’re not totally against the stress test, but the one-size-fits-all approach—essentially what’s good for one market must be good for others—needs to be revised,” he said. “A 30-year amortization for properties would create better environments for Canadians trying to buy houses.”
Montreal might have Canada’s hottest real estate market, but, using 2016 Census data, the provincial homeownership rate (61%) is below the national average (70%), according to a statement from the Quebec Professional Association of Real Estate Brokers.
“We believe there needs to be better support offered to buyers of residential properties, particularly first-time buyers,” QPAREB’s President and CEO Julie Saucier said in the statement. “We also support the implementation and maintenance of home renovation tax credit programs to encourage the purchase of properties requiring upgrades, a refund of transfer duties for first-time buyers, and the introduction of mortgage rules that are adapted to regional and provincial differences.”
The real issue, says Collins, is adequate housing supply has been obstructed, notably by red tape, but he’s encouraged by the Ontario and Toronto municipal governments’ acknowledgement of the problem.
“At the centre of the problem it was a supply issue and people were looking to buy homes without there being enough product out there,” he said. “And [B-20] was brought in to offset that, but that shouldn’t have been the focus.”  By Neil Sharma
Liberals’ proposed foreigner-targeted tax will not cool down markets  
The Liberals’ campaign promise of a new tax on foreign home buyers may not be enough to moderate a national housing market on the resurgence, observers say.
Last week, the party pledged that if re-elected, it will “address the impact of foreign speculation, which drives up housing costs.” This will be in the form of a 1% speculation and vacancy tax on residential properties with “non-resident, non-Canadian” owners.
Said levy will be on top of already existing measures targeting foreigners in multiple markets, particularly in Vancouver and Toronto. Indeed, the Liberals said that their anti-speculation measure will emulate that of British Columbia, which is currently set at 2% for foreign owners.
In an interview with the Financial Post, Barclays Capital analyst John Aiken argued that the proposal is shaping up to be another “incremental factor” that will reduce demand only minimally.
“Realistically, the inelasticity in demand that these type of buyers have, I’m not sure if this is going to have an overly material impact on pricing or the housing market,” Aiken said.
Bank of Montreal chief economist Doug Porter mirrored these thoughts, noting that the tax will likely not prevent the national housing market’s return to its previous red-hot state.
“I don’t rule out that it could have an impact on cities other than Vancouver and Toronto, but I think they’re much less influenced by non-resident purchases,” Porter explained. “And what’s driven the housing market has largely been healthy job gains, strong population growth and, yes, a pullback in long-term mortgage rates this year.”
However, any such measure will be valuable in sending the message that Canada will not tolerate wealthy foreigners pushing other hopeful home buyers out of the market, Porter added.
“In a world where, especially in the big cities, housing affordability is such an issue, I don’t really think we can afford to allow any forms of speculation, especially from outside of the country, to be influencing the market.”  By Ephraim Vecina.
What is a Central Bank?
As we head into the federal election we’ll be hearing a lot about the economy, interest rates and housing.  In this country, one of the key players in all of those things is the Bank of Canada, commonly referred to as “the central bank”.
Since the financial collapse a decade ago central banks and the people who run them have become fixtures in the news.  There is hardly a day that goes by that the Bank of Canada, the U.S. Federal Reserve, the European Central Bank, or some other is not cited in media coverage.
Generally, knowledge about central banks is limited to interest rate announcements, so here is a deeper look at what they do.
A central bank is an independent, national body that:
  • conducts monetary policy
  • guides the economy by managing inflation and currency valuation
  • helps regulate banks
  • provides research and advice to governments
Most central banks are governed by boards.  The highest ranking member of the board – the Chair or the Governor – is often named by the head of the government.  They can also be named by a selection committee.  In either case the national legislative body (congress or parliament, or a committee of legislative members) approves the choice.  This keeps the central bank aligned with the country’s long-term policy goals while keeping it at arm’s length from political interference in its day-to-day operations.
The key responsibility of a central bank is to promote a stable and secure economy and financial system.  The banks have a few tools they use to do this including:
  • regulating the lending and reserve requirements of private banks
  • controlling the amount of currency that is in circulation
  • setting interest rates
Regulating banks and other financial institutions allows central banks to control risks to the financial system caused by over lending or improperly secured loans.
Controlling the amount of currency in circulation allows central banks to manage the value of the currency relative to other national currencies.  This can be a useful tool for managing inflation.
Setting interest rates is the main tool central banks use to manage inflation.
In our next article we will take a closer look at the specifics of how the Bank of Canada operates, and how it affects you.  By First National Financial.
Treading water in a rising tide  
In the rising tide of interest-rate-cut expectations, the Bank of Canada is treading water.  The central bank did meet expectations by holding its policy rate at 1.75% for a seventh consecutive setting.
The reasons are fairly apparent: inflation is on target, GDP growth is good (Q2 was far better than expected even if it was based on some one-off stats), job growth is steady and unemployment is at a generational low of 5.7%.
It seems pretty clear that the BoC really does not want to trim its trend setting rate.  The economic numbers do not warrant it and we are in a federal election cycle.  The Bank has a long history of stepping to the sidelines during elections in an effort to preserve its reputation for political neutrality.
But the BoC is under a lot of external pressure to cut its rate.  Canada is one of just a handful of developed economies with a policy rate above zero.  Of course, the United States is one of the others and it is already making cuts.
The U.S. Fed says it is trying to ensure the economy does not stall in the months ahead.  Being as the U.S. is the biggest economy in the world, others – including Canada – will likely have to take out some insurance of their own.
The next BoC setting is October 30th.  That is close to, but after, the October 21st election so it is politically doable.  The next opportunity is December 4th, just in time for Christmas.  By First National Financial.
August Data Confirm That Housing Has Turned the Corner  
Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales rose for the sixth consecutive month. Transactions are now running almost 17% above the six-year low reached in February 2019, but remain about 10% below highs reached in 2016 and 2017. Toronto, Montreal and Vancouver all saw sales and prices rise. CREA updated its 2019 sales forecast, now predicting a 5% gain this year. Gains were led by a record-setting August in Winnipeg and a further improvement in the Fraser Valley. These confirm signs that the country’s housing market is returning to health.
Actual (not seasonally adjusted) sales activity was up 5% from where it stood in August 2018. The number of homes that traded hands was up from year-ago levels in most of Canada’s largest urban markets, including the Lower Mainland of British Columbia, Calgary, Winnipeg, the Greater Toronto (GTA), Ottawa and Montreal.
New Listings
The number of newly listed homes rose 1.1% in August. With sales and new supply up by similar magnitudes, the national sales-to-new listings ratio was 60.1%—little changed from July’s reading of 60.0%. The measure has risen above its long-term average (of 53.6%) in recent months, which indicates a tighter balance between supply and demand and a growing potential for price gains.
Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in August 2019. Of the remainder, the ratio was above the long-term average in all markets save for some in the Prairie region.
There were 4.6 months of inventory on a national basis at the end of August 2019 – the lowest level since December 2017. This measure of market balance has been increasingly retreating below its long-term average (of 5.3 months).
There is considerable regional variation in the tightness of housing markets. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure is running well below long-term averages in Ontario, Quebec and Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains. Meanwhile, the measure is well centred in balanced-market territory in the Lower Mainland of British Columbia, making it likely that prices there will stabilize.
Home Prices
Canadian home prices saw its biggest one-month gain in two years. The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% m-o-m in August 2019.
Seasonally adjusted MLS® HPI readings in August were up from the previous month in 14 of the 18 markets tracked by the index, marking the biggest dispersion of monthly price gains since last March.
In recent months, home prices have generally been stabilizing in British Columbia and the Prairies, a measure which had been falling until recently. Meanwhile, price growth has begun to rebound among markets in the Greater Golden Horseshoe (GGH) region amid ongoing price gains in housing markets east of it.
A comparison of home prices to year-ago levels yields considerable variations across the country, with declines in western Canada and price gains in eastern Canada.
The actual (not seasonally adjusted) Aggregate Composite MLS® (HPI) was up 0.9% year-over-year (y/y) in August 2019. This marks the second consecutive month in which prices climbed above year-ago levels and the most substantial y/y increase since the end of last year.
Home prices in Greater Vancouver (GVA) and the Fraser Valley remain furthest below year-ago levels, (-8.3% and -5.5%, respectively). Vancouver Island and the Okanagan Valley logged y/y increases of 3.7% and 1.5% respectively.
Prairie markets posted modest price declines, while y-o-y price growth has re-accelerated ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth has continued uninterrupted for the last few years in Ottawa, Montreal and Moncton.
All benchmark home categories tracked by the index returned to positive y/y territory in August. Two-storey single-family home prices were up most, rising 1.2% y/y. This category of homes had .been hardest hit during the slump. One-storey single-family home prices rose 0.7% y/y, while townhouse/row and condo apartment units edged up 0.3% and 0.5%, respectively.
Stress Test
Canada’s introduction of stricter mortgage-lending rules last year inhibited some potential home buyers. Until recently, declining interest rates and lower home prices may have allowed some of those buyers to return to the market, according to the CREA report.
“The recent marginal decline in the benchmark five-year interest rate used to assess homebuyers’ mortgage eligibility–from 5.34% to 5.19%–together with lower home prices in some markets, means that some previously sidelined homebuyers have returned,” said Gregory Klump, CREA’s chief economist. “Even so, the mortgage stress-test will continue to limit homebuyers’ access to mortgage financing, with the degree to which it further weighs on home sales activity continuing to vary by region.”
CREA also updated its forecasts. National home sales are now projected to recover to 482,000 units in 2019, representing a 5% increase from the five-year low recorded in 2018. The upward revision of 19,000 transactions brings the overall level back to the 10-year average, but remains well below the annual record set in 2016, when almost 540,000 homes traded hands, CREA said.
Bottom Line: This report is in line with other recent indicators that suggest housing has recovered from a slump earlier, helped by falling mortgage rates. The run of robust housing data gives the Bank of Canada another reason — along with robust job gains, higher wage rates and stronger than expected output growth in Q2 — to hold interest rates steady, even as more than 30 central banks around the world have cut interest rates further.
The Federal Open Market Committee meets again on Wednesday, and it is widely expected that they will cut rates by 25 basis points as the White House is calling for “emergency easing moves.” The Trump administration has just in the past few days succumbed to political pressure to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.
As a result of this recent easing in trade tensions and last week’s cut in overnight rates further into negative territory by the European Central Bank, the flight to US Treasury bond safety diminished, raising the US and Canadian government bond yields by roughly 25 basis points from extremely low levels. Canadian 5-year bond yields at 1.48% are at their highest level in two months. In consequence, the spread between the best 5-year fixed mortgage rates and 5-year government bonds is at a very tight 77 basis points, which is likely not sustainable. A more normal spread between the two is 120-ish (or more) for the best rates and 150-plus-ish (for regular rates). Some lenders are already hiking mortgage rates.
The situation has been compounded with even more considerable uncertainty with the weekend bombing of the Saudi Aramco oil fields, taking an estimated half of all Saudi oil out of production. Stay tuned.
What happened with rates, yield curves and new issues this week?
Canadian bond yields whipsawed throughout the week on the back of nothing substantive economic news wise. The current 5 year GOC is yielding 1.40% and the current 10 year is yielding 1.36%. Since the last commentary on September 13th, 5 year Government of Canada yields are actually lower by 10 bps. That’s still 25bps higher than a month ago.  Suffice to say, it’s been an active month in determining market level mortgage rates.
On the credit curve, CMB’s have reacted similarly with the 5 year CMB yielding 1.70% and the 10-year yielding 1.78%. The 5-10 spread has widened out from about a month ago when it was only 5bps. There is still a metric-ton of demand for 10 year product. Luckily for you, the borrower, First National has you covered for even 10, 15 or 20 year commercial mortgages! Talk to your favourite sales gal or guy today.
So how’s the yield curve look these days? Well, if you remember there was a lot of talk back when the yield curve inverted. If you also read the leading paragraph you probably noticed that the 5 year is yielding less than the 10 year. That’s inversion in my book. No news yet on signs of a recession either. However, what they don’t teach you in ECON 101 is that yield curves can sometimes be not only inverted, but can also look like they are modelled after Canada Wonderland’s ” Behemoth”. Don’t believe me? See Canada’s current yield curve below: 
It looks like a fun ride, but it’s unbeknownst to me where it takes our economy next.
Finally, the low rate environment and decent risk appetite made new issuances flush the last couple weeks. Equitable Bank came to market with $200 Million in deposit notes maturing September 26, 2022. The deal priced at a spread of +145 bps over the GOC curve and was well subscribed with over 30 buyers.  It’s always good to see fellow lenders issuing debt to get a sense of borrowing costs.
Merrill Lynch Canada or the soon to be called ‘Bank of America Securities’ issued a Jumbo NHA MBS deal this Tuesday. Merrill sold $750 Million of the $1.5 Billion pool at a spread of +47 bps over the GOC curve. The deal priced well with over 23 buyers, 15%-20% fills and the books were 2x covered. This is coming on the back of Home Trust’s market-leading RMBS deal, so it’s great for both borrowers (you) and lenders (us), that investor appetite is “50% off coupon at Mandarin Buffet” level for Mortgage-Backed securities.
Economic and Other News
We missed covering CPI on the 18th, but overall it didn’t shake any markets. The CPI or inflation metric for August came in at -0.1% vs the -0.2% as expected. That keeps the YoY CPI number at a solid 1.9%. Not much there for the Bank of Canada.  On the 20th, we had retail sales for July which came in lower than expected. The month-over-month number for July came in at 0.4% vs the expected 0.6%. The market shrugged off the outcome overall and all eyes are on GDP which comes out next Tuesday. The Bank of Canada is currently priced at around 19% for a cut before the end of 2019.
South of the border, the Fed did what was expected of them and cut their fed funds rate by 25bps. More interesting than that is what’s happening in the US repo markets. Repo markets, which are the basis of all short term funding for financial institutions, saw large spikes in funding costs the last couple weeks. Reaching a level of 10% for overnight funding at some points, the repo market south of the border has seen a major squeeze for a variety of reasons including: corporate tax day, smaller bank balance sheets and large Treasury bill settlements. Why am I talking about this? It’s a niche but important market and the backbone of the financial system, so it’s worth reading into if you’re interested.
Finally, in other niche news you probably didn’t know, a German court recently ruled that being hungover is an illness. The ruling came after a food product marketed as a “hangover cure” lost in court. In Germany, information about food products cannot ascribe properties preventing, healing or treating illnesses.  Unfortunately, when I tried using my new found illness to skip work this morning, the Treasury Guy had me writing this instead.    ByAndrew Masliwec, Analyst, Capital Markets, First National Financial.
Mortgage Interest Rates
Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is set at 5.19%.  Bond market are placing upward pressure on Fixed rates and lender haves started raising fixed rates.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.
Other Industry News & Insights
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.
10 Sep



Posted by: Adriaan Driessen

Industry & Market Highlights 

First-Time Home Buyer Incentive

As of September 2nd 2019, Canadians interested in the First-Time Home Buyer Incentive can submit their applications for a shared equity mortgage with the Government of Canada. 

The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

How it all works – Find full details here.

Government’s homebuying incentive called a cynical election ploy 

The First-Time Home Buyer Incentive is a week old, but don’t expect skyrocketing demand for a program expected to help fewer Canadians than the number bandied by the federal government.

“If I’m a betting man, I’m going to suggest this thing has smaller uptake than the 100,000 number the government keeps waiving around,” said Robert McLister, mortgage editor of Rates.ca and founder of Ratespy.com. “In the majority of cases, you qualify for less—with a regular down payment, the typical borrower qualifies for 4.5 times their income, but now it’s capped at four times their income. Under the regular 5% down, vanilla CMHC mortgage, you can qualify for up to $60,000 more.”

The First-Time Home Buyer Incentive—in which the Canada Mortgage and Housing Corporation will provide up to 10% on the purchase price of a new build and 5% on a resale—caps household income at $120,000. The policy states that “participants’ insured mortgage and the incentive amount cannot be greater than four times the participants’ annual household incomes.”

According to calculations provided by Ratehub.ca, a household with $100,000 of income that puts a 5% down payment qualifies for a $479,888 home. This leaves a mortgage amount of $474,129 after down payment and the CMHC insurance premium. The household qualifies for a mortgage of 4.74 times their income.

If the same household elected to participate in the First-Time Home Buyer Incentive their maximum purchase price drops to $404,858, because this is the maximum they can afford while keeping the total between their mortgage and the government incentive below four times their income.

“The number one issue facing first-time homebuyers is how much they qualify for, not the monthly payment after the home closes, and that’s what this is aimed at,” said James Laird, co-founder of Ratehub.ca. “They qualify for less if they use this program.”

The program is suitable for homebuyers in markets with weak housing demand and economic fundamentals. McLister added that borrowers who use the First-Time Home Buyer Incentive, and plan on living in the home for around five years, could potentially save more on interest and default insurance premiums than they’d give back to CMHC.

“Who it’s not for is someone who plans to live there for a long time, especially in a housing market that’s hotter and has stronger fundamentals,” he said. “In that case, it could cost you more in the equity you give up than what you save on interest and default insurance premiums.”

So why was it introduced in the first place?

“If you’re running for election in the fall and one of the hottest button issues is housing affordability and you don’t do anything to help millennial voters, your odds of winning the election are lower,” said McLister. “So they have tried to appear like they’re coming to the rescue with a program that has very little impact.”  By Neil Sharma

First-Time Home Buyer Incentive is live, but industry is skeptical  

As Canadians enjoyed the Labour Day holiday, a new government scheme was officially launched that aims to help more people get on the housing ladder.

But the First-Time Home Buyer Incentive may not be the panacea for potential new entrants into Canada’s housing market that Justin Trudeau and his ministers hope.

Critics say that it will not make a widespread difference to the ability of first-time homebuyers to afford to follow their homeownership dreams.

With the program’s requirements for household earnings of a maximum $120,000 and a mortgage-to-income ratio capped at 4 times household income, the top-end of the homes that the scheme will help to buy is far short of the $826K average home price in Vancouver or $982K in Toronto.

“It’s a very narrowly-focused program,” Royal LePage President Phil Soper told Bloomberg. “It’s just not a big enough slot of the market to move it.”

100K borrowers or 5K?

CMHC, which is administering the program, estimates that it could help 100,000 first-time homebuyers but Mortgage Professionals Canada thinks the figure could be as low as 5,000 as potential buyers are dissuaded by giving up equity in their new home and mortgage insurance requirements.

“The government says it wants to make homeownership more affordable and accessible, but its actions say otherwise,” MPC chief economist Will Dunning told Bloomberg. “The proposals “to improve access are likely to have only small positive effects.”  By Steve Randall.

Bank of Canada Interest Rate announcement  

The Bank of Canada made their Interest Rate announcement on Wednesday, September 4th and maintained its target for the overnight rate at 1 ¾ percent. The Bank Rate is correspondingly 2 percent and the deposit rate is 1 ½ percent.  View the full press release HERE.

Economic Highlights

Bank of Canada reveals latest interest rate decision  

The Bank of Canada resisted pressure from investors by declining to signal it will soon follow global peers in easing monetary policy.

At a decision Wednesday, policy makers left interest rates unchanged for a seventh straight meeting and said stronger than expected growth, as well as inflation on target, means current levels of stimulus are where they should be. That’s despite the escalating trade war between China and the U.S. undermining global economic momentum.

The Bank of Canada’s reluctance to signal a greater willingness to cut rates — which makes it an outlier as counterparts around the world ease policy — may come as a surprise to some investors and analysts who had expected more dovish language and some easing later this year. The Canadian dollar rose after the statement.

“This is a bit more hawkish than we anticipated,” said Brett House, deputy chief economist at Bank of Nova Scotia. It’s “not a clear change in bias. It doesn’t close the door on an October cut, but it doesn’t set up an October cut either.”

Wednesday’s narrative underlined trade risks and reiterated that Canadian growth is likely to slow in the second half of this year — all of which suggests policy makers are far from confident about the economic outlook and could be keeping the door open for increasing stimulus if things worsen.

Global Easing

But the net effect of the statement is a continuation — at least explicitly — of the central bank’s reluctance to show its hand on whether it plans to join other central banks like the Federal Reserve in easing policy, preferring instead to wait for more concrete signs of weakness before moving.

“In sum, Canada’s economy is operating close to potential and inflation is on target. However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies,” the central bank said in its statement. “In this context, the current degree of monetary policy stimulus remains appropriate.”

The Canadian dollar rose 0.4% to C$1.3280 per U.S. dollar at 10:09 a.m. Swaps trading suggests investors are fully pricing in a cut by December, with strong odds of a second by this time next year. That’s still less than the four rate cuts priced by the Federal Reserve over that time.

“The Bank of Canada is stalling but it will eventually be peer-pressured into interest-rate cuts,” Frances Donald, chief economist at Manulife Investment Management Ltd., told BNN Bloomberg.

Waiting too long is a risky strategy that could backfire if policy makers are late to recognize spillover effects on businesses and households, particularly since the country’s outlier status on policy could fuel gains in the Canadian dollar.

Bank of Canada officials said they will pay close attention to “global developments and their impacts on the outlook for Canadian growth and inflation.”

The case for cheaper money isn’t as compelling in Canada as it is elsewhere. A strong run of economic data affords the Bank of Canada opportunity to resist — as it has so far — the dovish turn in global policy.

Interest rates also remain stimulative in real terms, and borrowing costs have already declined sharply in the country because of falling global bond yields — a development the Bank of Canada cited in its statement. But escalating tensions between China and the U.S. are getting tougher to overlook. Trump’s tariffs on imports from China have already become a major reason behind global factory weakness.

The Bank of Canada characterized Canadian second quarter growth of 3.7% annualized as “strong” but noted some of the strength was probably temporary and pointed out that consumption spending was unexpectedly soft.  By Bloomberg News, Theophilos Argitis.

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is 5.19%.  Fixed rates are hold steady.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

1 Aug



Posted by: Adriaan Driessen

Industry & Market Highlights 

Bank of Canada Benchmark Qualifying Rate

Effective July 22, 2019, the Bank of Canada 5-year Benchmark Qualifying Rate is 5.19%.

What you need to know

  • The qualifying rate legislation was created to ease customer affordability in the event renewal interest rates are higher than the rate received at origination. The Bank of Canada publishes the Benchmark Qualifying Rate.

Qualifying Mortgage Rate Falls For First Time Since B-20 Intro

The interest rate used by the federally regulated banks in mortgage stress tests has declined for the first time since 2016, making it a bit easier to get a mortgage. This is particularly important for first-time homeowners who have been struggling to pass the B-20 stress test. The benchmark posted 5-year fixed rate has fallen from 5.34% to 5.19%. It’s the first change since May 9, 2018. And it’s the first decrease since Sept. 7, 2016, despite a 106-basis-point nosedive in Canada’s 5-year bond rate since November 8 (see chart below).

Five-Year Canadian Bond Yield

The benchmark qualifying mortgage rate is announced each week by the banks and “posted” by the Bank of Canada every Thursday as the “conventional 5-year mortgage rate.” The Bank of Canada surveys the six major banks’ posted 5-year fixed rates every Wednesday and uses a mode average of those rates to set the official benchmark. Over the past 18-months, since the revised B-20 stress test was implemented, posted rates have been almost 200 basis points above the rates banks are willing to offer, and the banks expect the borrower to negotiate the interest rate down. Less savvy homebuyers can find themselves paying mortgages rates well above the rates more experienced homebuyers do. Mortgage brokers do not use posted rates, instead offering the best rates from the start.

The benchmark rate (also known as, stress test rate or “mortgage qualifying rate”) is what federally regulated lenders use to calculate borrowers’ theoretical mortgage payments. A mortgage applicant must then prove they can afford such a payment. In other words, prove that amount doesn’t cause them to exceed the lender’s standard debt-ratio limits.

The rate is purposely inflated to ensure people can afford higher rates in the future.

The impact of the B-20 stress test has been very significant and continues to be felt in all corners of the housing market. As expected, the new mortgage rules distorted sales activity both before and after implementation. According to TD Bank economists in a recent report, “The B-20 has lowered Canadian home sales by about 40k between 2017Q4 and 2018Q4, with disproportionate impacts on the overvalued Toronto and Vancouver markets and first-time homebuyers…All else equal, if the B-20 regulation was removed immediately, home sales and prices could be 8% and 6% higher, respectively, by the end of 2020, compared to current projections.”

According to Rate Spy, for a borrower buying a home with 5% down, today’s drop in the stress-test rate means:

  • Someone making $50,000 a year can afford $2,800 (1.3%) more home
  • Someone making $100,000 a year can afford $5,900 (1.3%) more home
  • (Assumes no other debts and a 25-year amortization. Figures are rounded and approximate.)

For a borrower buying a home with 20% down, today’s drop in the stress-test rate means:

  • Someone making $50,000 a year can afford $4,000 (1.4%) more home
  • Someone making $100,000 a year can afford $8,300 (1.4%) more home
  • (Assumes no other debts and a 30-year amortization. Figures are rounded and approximate.)

Bottom Line: Almost no one saw this coming due to the stress test rate’s obscure and arcane calculation method (see Note below). This 15 basis point drop in in the qualifying rate will not turn the housing market around in the hardest-hit regions, but it will be an incremental positive psychological boost for buyers. It should also counter, in some small part, what’s been the slowest lending growth in five years.

Note: Here’s the scoop on why the qualifying rate fell. According to the Bank of Canada:

“There are currently two modes at equal distance from the simple 6-bank average. Therefore, the Bank would use its assets booked in CAD to determine the mode. We use the latest M4 return data released on OSFI’s website to do so. To obtain the value of assets booked in CAD, simply do the subtraction of total assets in foreign currency from total assets in total currency.”

The BoC explains further:

“Prior to July 15th, we were using April’s asset data to determine the typical rate as that was what was published on OSFI’s website. On July 15th, OSFI published the asset data for May, and that is what we used yesterday to determine the 5-year mortgage rate. As a result, the rate changed from 5.34% to 5.19%.”  Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Equifax to pony up nearly $1 billion in settlement 

Equifax will pay up to US$700 million to settle with U.S. federal and state governments over a 2017 data breach that exposed the private information of nearly 150 million people, including thousands in Canada.

The settlement with the U.S. Consumer Financial Protection Bureau and the Federal Trade Commission, as well as 48 states and the District of Columbia and Puerto Rico, would provide up to US$425 million in monetary relief to consumers, a US$100 million civil money penalty, and other relief.

The breach was one of the largest ever to threaten private information. The consumer reporting agency, based in Atlanta, did not detect the attack for more than six weeks. The compromised data included Social Security numbers, birth dates, addresses, driver license numbers, credit card numbers and in some cases, data from passports.

“The consumer fund of up to US$425 million that we are announcing today reinforces our commitment to putting consumers first and safeguarding their data – and reflects the seriousness with which we take this matter,” said Equifax CEO Mark Begor.

Canada’s Office of the Privacy Commissioner concluded in April that the company fell short of their privacy obligations to Canadians, including poor security safeguards and holding information too long, but it did not level fines.

The privacy commissioner, which found that about 19,000 Canadians were affected by the breach, said the company entered into a compliance agreement and had taken steps to improve its security and accountability.

Equifax Inc. detected the attack on July 29, 2017 and contained it the following day. However, Equifax Canada wasn’t notified of the breach until just before the U.S. parent company publicly disclosed it on Sept. 7, 2017.

The breach occurred after hackers gained access to Equifax Inc.’s systems through a vulnerability the company had known about for more than two months, but had not fixed.

While Equifax Canada offered free credit monitoring to breach victims for at least four years, other protections didn’t match what was offered by the parent company, including credit freezes that restrict access to credit files.

The privacy commissioner also found that the transfer of information about Canadians to the U.S. without their knowledge was inconsistent with its obligations to obtain consent before disclosing personal information to third parties located in another country.

Equifax stock, which plunged 30 per cent in the days following the disclosure of the breach, have returned to levels where they traded before the incident.

Affected U.S. consumers may be eligible to receive money by filing one or more claims for conditions including money spent purchasing credit monitoring or identity theft protection after the breach and the cost of freezing or unfreezing credit reports at any consumer reporting agency.

All impacted consumers in the U.S. would be eligible to receive at least 10 years of free credit-monitoring, at least seven years of free identity-restoration services, and, starting on Dec. 31 and extending seven years, all U.S. consumers may request up to six free copies of their Equifax credit report during any 12-month period.

If consumers choose not to enrol in the free credit monitoring product available through the settlement, they may seek up to $125 as a reimbursement for the cost of a credit-monitoring product of their choice. Consumers must submit a claim in order to receive free credit monitoring or cash reimbursements.

“Companies that profit from personal information have an extra responsibility to protect and secure that data,” said FTC Chairman Joe Simons. “Equifax failed to take basic steps that may have prevented the breach that affected approximately 147 million consumers. This settlement requires that the company take steps to improve its data security going forward, and will ensure that consumers harmed by this breach can receive help protecting themselves from identity theft and fraud.”

The company said earlier this year that it had set aside around US$700 million to cover anticipated settlements and fines.

The settlement must still be approved by the federal district court in the Northern District of Georgia.  By Canadian Press.

Everything Canadians need to know about the Capital One data breach

The recent data breach that was announced by Capital One Financial Corp. has affected about 100 million people in the United States and about six million people in Canada.

The hacker obtained unauthorized access to personal information of Capital One customers and those who applied for Capital One credit card products.

Capital One said in a statement that the person responsible has been arrested. The U.S. financial institution, which is one of the world’s largest issuers of credit cards, said more specific details on how this will impact customers will be shared over the next few days.

What do we know so far about how this will affect Canadians?

The different kinds of information breached

Information from applications for Capital One credit card products between 2005 and early 2019 makes up the largest set of data compromised.

Capital One said the breach includes names, addresses, postal codes, phone numbers, email addresses, dates of birth and income.

Aside from information found on credit card application forms, some credit card customer data was also involved. This includes credit scores, limits, balances, payment history, contact information and some transaction history from the last three years.

Approximately one million Social Insurance Numbers were compromised.

Capital One said that customer login credentials were not hacked.

How to know if your data has been breached

Capital One said in a statement that they will notify customers if their data has been compromised, and free credit monitoring and identity theft insurance will be offered to anyone impacted by the breach.

The company did not specify how customers will be notified, but said more information will be available within the next few days. Capital One said they will not be calling anyone about the breach. If anyone does receive a call, it’s a scam.

If anyone has provided personal information over the phone or clicked on fraudulent links over email or text, Capital One urges customers to call them immediately and change their online banking password

Capital One credit cards issued in Canada

Capital One offers Canadian customers various Capital One Mastercard credit card products including a cashback card for Costco Wholesale members.

Retailer Hudson’s Bay Co. also offers a Mastercard product where the credit itself is being offered by Capital One.

“There is no indication at this time that this issue impacts any of our businesses’ credit cards or card applications,” HBC vice president of corporate communications Nicole Shoenberg said in an email.

“Customers should feel comfortable shopping with us in stores and online.”

Costco Canada did not immediately respond to a request for comment about what impact the breach has had on their networks.

How to monitor your accounts in the meantime

Capital One encourages customers to monitor their accounts for suspicious activity. If anyone notices suspicious activity on their account, Capital One says to call the number on the back of their credit card.

Customers can also order a copy of their credit report from either Equifax Canada or TransUnion Canada. Either credit bureau can place fraud alerts on credit reports for up to six years.  By Melissa Nennardo, CBC News.


Short-term rentals and Airbnb: What you need to know

What are the rules for Airbnb?

Every city will set its own rules for renting out all or part of a property on Airbnb or other short-term rental websites. In Toronto, for example, it is expected that only a principal residence will be able to be used for Airbnb. You can either rent out up to three of your bedrooms, or you can rent out the entire home, up to 180 days per year. You will also have to pay $50 to register the unit with the city and charge a four-per-cent tax.

Are guests considered tenants under the Residential Tenancies Act of Ontario?

This is not a simple answer. If you are living in a home or condominium and you just rent out rooms to guests on Airbnb, they are not tenants and can be treated as a guest and must leave when you ask them to leave. You do not have to use the Ontario Standard Form Lease. However, if they are renting your entire home, even for a few days, an argument can be made that they are in fact tenants and you need to sign the Ontario Standard Form Lease, which will govern the relationship. It will make no difference if this is a furnished apartment or not.

Can you evict a tenant to turn the unit into an Airbnb?

The likely answer to this is no in Ontario. While an eviction is possible if you are converting the unit to a commercial use, it is not permitted when the business will be for Airbnb. It will also likely not be possible to evict someone using the personal use family reason and then trying to rent all or part of the home on Airbnb before one year after the eviction. This could lead to penalties under the act.

Can you evict a tenant who is renting your unit on Airbnb without permission?

The answer is likely yes. This would be considered either an illegal sublet if no permission was granted in advance and a violation of the act, in that the tenant would be subletting for more money than they are paying in rent. However, the landlord would have to start eviction proceedings regarding any sublet within 60 days of finding out.

Will insurance cover any damage caused by guests?

Airbnb and similar sites offer insurance coverage, but it is recommended that you also inform your own insurance company if you are planning to rent it out, since the risk of damage will increase. For example, if the guest and owner privately agree to extend their stay without going through the short-term website, the website insurance policy will likely deny any claim. Further, if damage occurs that was not caused by the guest, the owner’s insurance claim to their own company will likely be denied if they were not advised about the new use of the property.

By Mark Weisleder


Mortgage Update - Mortgage Broker London

Economic Highlights

The Fed’s Quarter-Point Rate Cut Not the Start of Something Big

The Federal Open Market Committee (FOMC) cut the overnight target rate by 25 basis points as expected today. Chairman Jerome Powell, however, said it was designed to “insure against downside risks” rather than to signal the start of multiple rate cuts. President Trump called for “large” rate cuts on Twitter and has for months pressured the Fed to ease monetary policy. It is very unusual for the Fed to cut interest rates in the face of the continued strength in the US economy and the enormous declines in unemployment.

I cannot remember a reversal of policy with so little impetus. Indeed, the opening sentences of the FOMC statement are, “Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.”

The White House pressure is without precedent to the point that Trump publically threatened to demote Chairman Powell if the Fed didn’t cut rates. He also proposes to fill vacant seats with known rate doves. This infringement on Fed independence is very dangerous for the credibility of the central bank. Moreover, it will likely weaken the US dollar if additional rate cuts follow quickly.

Consumer spending remains strong; however, a slowdown in business fixed investment was caused by the President’s insistence on generating trade tensions with China, Canada, the UK and other trading partners. The global economy has slowed because of this uncertainty. China’s economy has decelerated significantly, and manufacturing and agricultural exports to China have been particularly hard hit.

Another issue of concern to the FOMC was the low level of inflation. The Fed targets a 2% inflation rate. The Fed’s favourite inflation measure is now running at about 1.4%-to-1.6%.

Two Federal Reserve Bank governors voted against this action preferring at this meeting to maintain the prior target range. It was the first time since Powell took over as chairman in February 2018 that two policymakers dissented.

Today’s action was the first interest rate cut since the financial crisis began more than a decade ago. The Fed started to normalize interest rates from historically low levels in 2015 as the US economy was recovering and continued to raise the fed funds rate until December 2018. Normalization of monetary policy also included the gradual shrinking of the Fed’s balance sheet–selling bonds into the marketplace, slowly reducing liquidity. Today, the Fed stated it would cease this activity as of tomorrow, rather than the planned date in September.

Bottom Line: The Bank of Canada will not follow the Fed. Canadian interest rates are already below those in the US. While the target range for the US fed funds rate is now 2%-to-2.25%, the target overnight rate in Canada is 1.75%. Moreover, today’s real GDP report for May surprised on the high side, suggesting that GDP growth in the second quarter could be close to 3%. This is well above the Bank’s earlier estimate and justifies the Bank’s remaining on the sidelines.

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


More weight on rates  

Some more weight has been added to the scale that is tipping in favour of an interest cut in the United States.  Economic growth, in the U.S., slowed to 2.1% in the second quarter, down a full percentage point, from 3.1% in the first quarter.

A key factor in the slowdown is a 5.2% drop in exports.  Many analysts see that as self-imposed pain brought on by the Trump administration’s trade fight with China.  The dispute is also contributing to the slowdown in Europe, and elsewhere.

The drop in GDP growth is seen as additional ammunition for those targeting the U.S. Federal Reserve for a rate cut this week.  However, there are prominent analysts who say a cut is not needed at this time.  U.S. growth remains above the five-year average and unemployment is at 50 year lows.

Last week the European Central Bank held the line on its benchmark interest rate, but made it clear it intends to take steps to boost the Euro-Zone’s sagging economy.  The ECB is signalling the distinct possibility of rate cuts and it is also looking at restarting its simulative bond buying program.

The Bank of Canada remains firmly on the sidelines.  It is content with the country’s employment rate, inflation, and its current growth figures.   By First National Financial.

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval reduced to at 5.19% increasing the average mortgage qualification with about $10,000 – not any significant change when it comes to qualifying for home ownership.  Fixed rates hold steady.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Other Industry News & Insights
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.
Adriaan Driessen
Mortgage Broker 
Dominion Lending Forest City Funding 10671
Cell: 519.777.9374
Fax: 519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Lori Richards Kovac
Mortgage Agent
Dominion Lending Forest City Funding 10671
Cell: 519.852.7116
Fax: 519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
Adriaan Driessen
Sales Representative & Senior Partner
PC275 Realty Brokerage
Cell: 519.777.9374
Fax: 519.518.1081
415 Wharncliffe Road South
London, ON, N6J 2M3
3 Jul



Posted by: Adriaan Driessen

Industry & Market Highlights \

CMHC’s First-Time Home Buyer Incentive Falls Short of Expectations

The Canada Mortgage and Housing Corporation held an official announcement yesterday to release details of its First-Time Home Buyer Incentive (FTHBI).

While officials reiterated how this shared-equity program will help young middle-class Canadian buyers, there were scant new details beyond what has previously been confirmed since the program was first announced in the March budget.

A Recap of the FTHBI First-Time Home Buyer Incentive

  • CMHC will contribute 5% of a down payment for the purchase of an existing home, or 10% for the purchase of a new build
  • The mortgage must be default insured
  • The applicants’ household income must be less than $120,000
  • No monthly payments are required, and this amount can be paid back at any time, or upon the sale of the house
  • CMHC shares in both the proportionate gains or losses in home value
  • The insured mortgage plus incentive cannot be more than four times the participants’ household income (roughly a $565,000 maximum purchase price for someone making a 15% down payment)
  • The program will be available to buyers on September 2, 2019
  • The government anticipates 100,000 first-time buyers will take advantage of the program over the next three years at a cost of $1.25 billion.

It was also confirmed on Monday that participants would have to repay CMHC’s 5% or 10% contribution within 25 years, or when the property is sold. The incentive amount could also be repaid at any time prior to that and would not be subject to prepayment penalties.

In all cases, the incentive amount would have to be paid back at current fair market valuation, which would be determined by CMHC using an independent appraisal.

Jean-Yves Duclos, the Minister of Families, Children and Social Development, which oversees the CMHC, said the biggest benefit for first-time buyers is that the incentive would reduce monthly mortgage payments.

“The First Time Home-Buyer Incentive is designed to benefit those who need more assistance with housing costs, middle-class Canadians,” Duclos said. “Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets.” Duclos said a family buying a $500,000 house through the incentive would save up to nearly $300 a month in interest payments. CMHC provided a full breakdown of potential savings here.

But Will it Work?

There had been many skeptics of the program since it was revealed three months ago, and yesterday’s official announcement did little to quell the criticism.

The key argument is that while the program is aimed to assist young first-time buyers who have been priced out of the most expensive markets, buyers in Toronto and Vancouver will be hard-pressed to find a property under $500,000.

“We think it’s definitely going to have very regional application,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “In the two most expensive cities, where we would suggest first-time homebuyers need the most support, this solution is not really going to do that.”

On Twitter, CMHC President and CEO Evan Siddall responded by saying: “No program is going to work as well in higher priced markets. Using 2018 data, 2,300 homebuyers would have qualified in Toronto and 1,100 in Vancouver. Around 25% of home sales in Toronto in 2018 were for homes under $500K and 17% in Vancouver.”

Others point out that buyers would actually be able to qualify for a larger mortgage if they don’t use the FTHBI because of the program’s restriction to those with a mortgage less than or equal to four times their total gross income.

“A qualified borrower making $60,000 a year and putting 5% down, for example, could afford a roughly $269,000 home with a regular default-insured mortgage, but only $253,000 using the FTHBI,” wrote RateSpy.com’s Rob McLister. “That, the ~$565,000 maximum purchase price and the need to cough up a chunk of your home value gains are what will limit the FTHBI’s appeal, especially in our biggest cities.”

Siddall has publicly said the CMHC spent months tailoring a “Goldilocks” design so that the program would help some first-time buyers, but not enough to impact the housing market to an extent that would contribute to rising prices.

Adam Vaughan, a Toronto MP and Parliamentary Secretary to the Minister of Families, Children and Social Development, responded to a question about the program’s application in a high-priced city like Toronto.

“Buying a new home in Forest Hill (is), probably unlikely,” he said. “Buying a home here in Mississauga, absolutely a possibility. And on transit lines, it gets you to jobs right across the GTA.” By Steve Huebl.

The affordability fight

A new report out of the University of British Columbia says millennials – who make up the bulk of the highly coveted first-time buyer cohort – are still wildly priced out of the housing market.

The report, titled “Straddling the Gap”, says 25 to 34 year-olds are stuck between high home prices, rising rents, stagnant wage growth and the threat of rising interest rates.  It says that – over the next decade, on a national basis – average home prices would have to drop by more than $220,000 (about half their current value), OR wages would have to increase by more than $93,000 a year (about double their current level) in order for housing to be affordable.

In a hot market, like Vancouver, prices would need to drop by about 75%, OR wages would need to increase by about 400%.

Over the past 40 years the home-price-to-income ratio has risen from about 4 to 1, to more than 10 to 1.  Millennials are facing 13 years of saving in order to accumulate a 20% down payment, according to the report.  Their parents and grandparents typically had to save for just four years.

The UBC report comes as the City of Montreal is finalizing a proposed by-law that, the mayor says, will address affordability concerns.  The Montreal market has been picking up steam.  According to CMHC, sales are outpacing new listings and there is evidence of overheating.

Montreal mayor Valérie Plante is worried rising prices are forcing people off the island and into the suburbs.  A recent study shows 24,000 people left Montreal for outlying neighbourhoods between July 2017 and July 2018.

Montreal’s new by-law would force developers to set aside as much as 20% of new units for affordable housing, social housing or family-sized units.  The law is set to take effect 2021.  By First National Financial.

Ontario passes legislation to cut red tape, ease housing crisis  

The Ontario government has passed legislation which aims to tackle the province’s housing crisis.

The More Homes, More Choice Act will cut red tape, helps keep costs predictable, and encourages new and innovative solutions to housing design, construction, and ownership.

“Our government wants to put affordable home ownership in reach of more Ontario families, and provide more people with the opportunity to live closer to where they work,” said Steve Clark, Minister of Municipal Affairs and Housing. “That’s why we consulted widely and acted swiftly to face the housing crisis we inherited head on. This legislation will make it easier to build more homes, more quickly, giving people more housing options and helping to bring prices down.”

The Act will also support more housing near transit links to help cut commutes, and with greater scope to build secondary units there should also be positive impact on the rental market.

The Act has been welcomed by Tim Hudak, CEO of Ontario Real Estate Association who said action is critical.

“For the first time in our lifetime, home ownership is on the decline across the country: there is simply not enough supply to meet demand. The Canadian Dream of home ownership has been slipping out of reach for thousands of families, millennials, and new Canadians,” he said.

The association has been calling for bold action for several years and Hudak says that the Act’s inclusion of many of its ideas are key to tackling the housing crisis.

“Ontario REALTORS ® applaud Steve Clark, Minister of Municipal Affairs and Housing and the Ford government for their leadership in helping create the next generation of Ontario home owners,” he added.  By Steve Randall.

Millennials need a major home price drop or sharp wage increase 

Despite some lower prices recently, many young Canadians are still far from able to afford to buy a home according to a new report.

Generation Squeeze says that in many cities there would have to be a major drop in home prices or a significant rise in wages to enable millennials to enter the housing market.

For example, Vancouverites would need their typical full-time wages to increase to $200,400 or four times their current level; or house prices would need to fall by three-quarters (a $795K drop) to make homes affordable (based on CMHC’s measure of households spending no more than 30% of their pre-tax earnings on housing.)

Across Canada, a wage increase to $93,400 a year, almost double current levels; or a home price drop of around half ($223,000) would be required.

“Despite recent nominal declines in housing prices compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels. If housing markets are levelling out, they remain untenably high,” said Dr. Paul Kershaw, lead author of ‘Straddling the Gap: A troubling portrait of home prices, earnings and affordability for younger Canadians’, and founder of Generation Squeeze.

The report says it now takes a typical young person 13 years to save a 20% down payment on an averaged priced home in Canada, compared to the five years it took when today’s aging population started out as young adults around 1976.

NHS needs extending

Generation Squeeze is calling on the federal government to expand the National Housing Strategy from the current pledge to support 530,000 of the most vulnerable Canadians, to an estimated 1.2 million who are in core housing need.

“A second phase of the National Housing Strategy must be launched to ensure all Canadians can afford a good home — whether renting or owning — by addressing failures in the broader housing market,” said Kershaw.

Generation Squeeze is also calling for the government to embrace “Homes First” as a guiding principle, with policy targets that would ensure that home prices don’t grow faster than local earnings.  By Steve Randall.

Financial Service Regulatory Authority of Ontario

On June 8, 2019, FSRA Ontario assumed the regulation of our sector from FSCO. CMBA Ontario is looking forward to being our members’ voice, with continued collaboration with FSRA.

We encourage our members to embrace the initiatives FSRA is taking on in the upcoming year.

There will be a public consultation announced in the coming weeks on Non Conforming High Risk Syndicated Mortgage Investments.

CMBA will be providing feedback to FSRA and we welcome comments from you!

FSRA is committed to the betterment of the industry, and are open to receiving feedback from you. Should you have any comments or concerns, please provide it directly to FSRA

Please continue to watch the FSRA website in the coming weeks for more info as well as our newsletter and social media outlets.   By Canadian Mortgage Brokers Association Ontario

Feds announce $10M for RCMP to fight money laundering after ministers’ meeting

The federal government has announced $10 million to help the RCMP prosecute money laundering after a special meeting in Vancouver of Canada’s finance and justice ministers to discuss the pervasive problem.

Finance Minister Bill Morneau says the ministers discussed the importance of prosecuting money launderers and the new funds will help co-ordinate information and hold criminals accountable.

Morneau says the ministers discussed making corporate ownership of real estate more transparent through beneficial ownership registries, though there was no final commitment from provinces on the topic.

He says Ottawa cannot simply create a framework for such registries, because there are issues around privacy and regulation, but he heard around the table that everyone was willing to take the next steps.

The federal government promised $160 million to help fight money laundering in the federal budget and Organized Crime Minister Bill Blair says Canada is building a new capacity to respond, investigate and prosecute the problem.

Ontario has requested federal funding on par with British Columbia to fight money laundering, but Blair says they didn’t discuss specific allocations of resources at the meeting.  By The Canadian Press

Economic Highlights

Market Commentary  

Before we discuss current events, I’ll answer some reader mail.  Mikail Alcott, Potato Sprouting Advocate and Knitting Coach asks “How do you approach a typical day as a Treasury Guy?”

Think big, think positive, never show any sign of weakness.  Always go for the throat.  Buy low, sell high.  Fear?  That’s the other guy’s problem.  It’s either kill or be killed.  You make no friends and you take no prisoners.  One minute you’re up half a million in soybeans and the next, boom, your kids don’t go to university and they’ve repossessed your Bentley.

The Basics

It’s been a volatile week as the market sorts through strong Canadian data contrasted with the dovish Fed tone in the US.

5 year GoC bonds are trading at 1.37% with yields as low as 1.28% on Tuesday (on dovish Euro Central Bank chatter and post Raptor parade fatigue) and as high as 1.40% on Wednesday (following strong inflation data)

10 year GoC bonds are trading at 1.48% after touching a low of 1.38% on Tuesday morning and high of 1.49% Tuesday.

Despite the fact that we’re finishing the week off the lows in terms of yield, it’s worth reminding you that just a few months ago, both 5 and 10 year yields were about 50bps higher at 1.90% and 2.00% respectively.


On Wednesday morning, reports showed that Canadian inflation quickened in May as the year over year consumer price index (“CPI”) jumped to 2.4% compared to 2.0% last month and median economist forecasts of 2.1%.  Core inflation, the measure most closely watched by policy makers, rose 2.1%, the highest level since February 2012.  Core inflation allows the Bank of Canada to ‘look through’ temporary changes in total CPI and focus on the underlying trend.  Predictably, bonds sold off and yields moved higher by about 7 basis points following the news.

Monetary Policy

Later on Wednesday afternoon the US Federal Open Market Committee (“FOMC”) held their regularly scheduled policy meeting.  The Fed held rates steady, as most expected, but raised the prospect for as many as two potential rate cuts later this year.  Uncertainty amid intensifying trade tensions and muted US inflation make the cuts plausible if not probable.  The overall tone of the Fed’s comments were sufficiently dovish to more than reverse the earlier inflation led rally and bonds yields promptly retreated 8-9 basis points.

The Bank of Canada has kept its key interest rate at 1.75% since October last year and there are mixed opinions about what the Bank will do this year.  Wednesday’s inflation report (and continued strong employment data) may help the bank resist the temptation to follow the Fed’s dovish tone.

For newer readers, when monetary policy makers are ‘dovish’ it means they favour a looser or more accommodating policy because, on balance, they want to stimulate the economy.  This is accomplished most commonly by lowering interest rates.  When Treasury Guy is dovish it means he favours ordering another round because, on balance, he wants to stimulate conversation.


On Monday  June 10th Laurentian Bank followed on the heels of Merrill’s NHA MBS issue the previous Friday and issued a $340 million pool of single family residential mortgages at GoC +52.  5 year term Residential MBS spreads have been pretty steady and pools have been trading in the range of +48 to +53 for the last 18 months.

On June 13th, Canada Housing Trust priced the regular 5 year CMB issue.  The $5.5 billion re-opening of the June 2024 maturity date was priced at GoC+33.5 compared to GoC+36.5 when the bond was first issued in March.

On June 14th RBC brought their eighth CMBS issuance from Real Estate Asset Liquidity Trust (“REAL-T”) since its return to market in 2014.  The $446 million issue of sequential pay certificates featured $185 million 3.5 year and $202 million 8.2 year AAA notes with 13% credit support in the from subordinate certificates.  The AAA notes were issued at spreads of +107 and +162 respectively.  Strong investor support ensured the transaction priced inside initial guidance.  Spreads are comparable to those on the last REAL-T issuance in July of 2018.

On Wednesday, RBC launched a $750 million 3-year floating rate covered bond.  This is RBC’s seventh covered bond in the Canadian market but first since 2016 (most covered bond issuance happens in Europe).  The deal was upsized to $1.25 billion on strong demand and priced at CDOR+14.


Let’s head on over to commodity corner for a visit.  West Texas Intermediate (WTI) has moved higher after Iran shot down a US military drone this week.  This comes on the heels of the recent tanker attacks.  What a time to be alive!  WTI is now trading around $57.15 per barrel.  That’s down from $75 back in October but still up from the low of $27 set back in February 2016.  It sounds pretty cheap when you consider that a barrel of Mountain Dew would run you $158.

Gold has also moved sharply higher this month and is trading at a 5 year high of $1,397 per ounce as investors turn to gold (and ammunition) to protect them from a gloomy economic outlook.

Other News

A European Union court has ruled that Adidas’ three stripe pattern lacks a ‘distinctive character’ and declared the trademark invalid.  Too bad.  I was hoping to trademark my new line of Treasury Guy apparel with a simple circle.  The ruling that three parallel equidistant stripes of equal width is generic probably hurts my case.  I guess the lesson here is that you should keep your logos sufficiently complicated.  Maybe I’ll call the SCTV Logos Galore people for help.

On Wednesday, our Co-founder and CEO Stephen Smith was inducted in to the Canadian Business Hall of Fame.  Also inducted was Claude Lamoureux, best known for his role as the CEO of the Ontario Teachers’ Pension Plan.  Claude ended his speech with a simple piece of advice I’d like to share.  “When faced with a difficult decision in business, choose the path that helps you sleep well, not the one that helps you eat well.”

On that note, I’d like to offer a piece of my own advice.  If it’s the weekend, then make the decision that helps you drink well.  Once it hits your lips, it’s so good!  By First National Financial, Jason Ellis.


Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates have dropped between 5-10 basis points in the last two weeks.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

Other Industry News & Insights


Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.


There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

11 Jun



Posted by: Adriaan Driessen

Industry & Market Highlights 


Statistics released by the Canadian Real Estate Association (CREA) show that national home sales increased in April with most markets recording increases in both transactions and prices.

The number of homes sold rose 3.6% compared with March, on a seasonally adjusted basis. The rebound in sales over the past two months still leaves activity slightly below readings posted over most of the second half of 2018, having dropped in February of this year to its lowest level since 2012.

April sales were up in about 60% of all local markets, with the Greater Toronto Area (GTA) accounting for over half of the national gain.

Actual (not seasonally adjusted) sales activity was up 4.2% year-over-year (y-o-y) in April (albeit from a seven-year low for the month in 2018), the first y-o-y gain since December 2017 and the largest in more than two years. The increase reflects improvements in the GTA and Montreal that outweighed declines in the B.C. Lower Mainland.

“Sales activity is stabilizing among Canada’s five most active urban housing markets,” said Gregory Klump, CREA’s Chief Economist. “That list no longer includes Greater Vancouver, which fell out of the top-five list for the first time since the recession and is well into buyers’ market territory. Sales there are still trending lower as buyers adjust to a cocktail of housing affordability challenges, reduced access to financing due to the mortgage stress-test and housing policy changes implemented by British Columbia’s provincial government,” said Klump.

New Listings

The number of newly listed homes rose 2.7% in April, adding to the 3.4% increase in March. New supply rose in about 60% of all local markets, led by the GTA and Ottawa.

With sales up by more than new listings in April, the national sales-to-new listings ratio tightened marginally to 54.8% from 54.3% in March. This measure of market balance has remained close to its long-term average of 53.5% since early 2018.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in April 2019.

There were 5.3 months of inventory on a national basis at the end of April 2019, down from 5.6 and 5.5 months in February and March respectively and in line with the long-term average for this measure.

Housing market balance varies significantly by region. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers their ample choice. By contrast, the measure remains well below long-term averages in Ontario and Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) appears to be stabilizing, having edged lower by 0.3% y-o-y in April 2019. Among benchmark property categories tracked by the index, apartment units were again the only one to post a y-o-y price gain in April 2019 (0.5%), while two-storey there was little change in single-family home and townhouse/row unit prices from April 2018 (-0.3% and -0.2%, respectively). By comparison, one-storey single-family home prices were down by -1.4% y-o-y.

Trends continue to vary widely among the 18 housing markets tracked by the MLS® HPI. Results remain mixed in British Columbia, with prices down on a y-o-y basis in Greater Vancouver (GVA; -8.5%) and the Fraser Valley (-4.6%), up slightly in the Okanagan Valley (1%) and Victoria (0.7%), while climbing 6.2% elsewhere on Vancouver Island.

Among Greater Golden Horseshoe housing markets tracked by the index, MLS® HPI benchmark home prices were up from year-ago levels in the Niagara Region (6.2%), Guelph (5.1%), Hamilton-Burlington (4.6%) the GTA (3.2%) and Oakville-Milton (2.5%). By contrast, home prices in Barrie and District held below year-ago levels (-5.3%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 4.6% in Calgary, 4% in Edmonton, 4.3% in Regina and 1.7% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply return to better balance.

Home prices rose 7.8% y-o-y in Ottawa (led by an 11% increase in townhouse/row unit prices), 6.3% in Greater Montreal (driven by a 7.8% increase in apartment unit prices), and 1.8% in Greater Moncton (led by an 11.5% increase in apartment unit prices).

Bottom Line:

The spring rebound in home sales is most evident in Toronto, where transactions climbed 11%, and prices rose 1.3%. Of 19 major markets tracked by the Ottawa-based real estate association, 16 recorded price gains last month.

One huge exception is Vancouver, which continues to soften. Benchmark home prices in that city were down 0.3% in April and have fallen 8.5% over the past 12 months. Even with the widespread rebound, national home sales are still below historical averages.

Economic fundamentals — from substantial employment gains to a sharp increase in immigration — remain supportive. Governor Poloz said earlier this week that he expects the housing markets to return to a more normal pace in the second half of this year. Benjamin Tal, the deputy chief economist at CIBC, reported yesterday that housing demand is stronger than suggested by official figures. Tal said incorrectly counting the number of students who live outside of their parents’ home for the majority of the year is problematic because it doesn’t provide a real sense of supply and demand in the country’s housing market.

Also supportive for housing is the dovish tilt globally from central banks that have helped bring down borrowing costs in recent months. Rates to renew a five-year mortgage aren’t much higher than they were when the mortgages were taken out, according to National Bank research. That means “no payment shock” for the 17.4% of mortgages renewing in 2019.  By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres.

Dirty money in the real estate market  

Some startling numbers released last week show how deeply Vancouver real estate is influenced by money laundering.

A report prepared for the British Columbia government says about $7.4 billion was laundered through the province in 2018.  More than two-thirds of that money, about $5 billion, was used to buy real estate.

It is estimated that money laundering activity raised the benchmark price of a home in B.C. by an average of 5%.  Popular and high-priced markets like Victoria and Greater Vancouver likely felt even bigger impacts, but separate numbers were not provided.

The report by Maureen Maloney, a law professor who chairs B.C.’s expert panel on money laundering in real estate, says the problem is even worse in Alberta, Ontario and the Prairies.  It is estimated that more than $40 billion was laundered through Canada last year.

The B.C. government is taking aim at money laundering in real estate with the Land Owner Transparency Act.  The legislation would create a public real estate registry that would clearly show who owns what.  One estimate, from 2016, put one-third of the most expensive properties in the Vancouver region under the ownership of opaque entities such as numbered companies.

The Maloney report goes a step further though, recommending the province implement “unexplained wealth orders”.  These would force people to prove they made purchases with legitimate money or have their property seized.  The orders would not require criminal charges or even any evidence of criminal activity.  They have been roundly condemned by civil rights organizations.  By First National Financial.

BoC: Financial system is stable 

The Bank of Canada is maintaining its optimistic outlook for the country’s economy – but…

The central bank’s latest Financial System Review says two persistent problems remain and two others are on the rise.

High household debt and imbalances in the housing market continue to represent the greatest threats to the financial system, while the increasing chance of a recession and riskier corporate borrowing are adding to concerns.

The household debt-to-income level in Canada closed-out 2018 at nearly 180%.  That is $1.80 owing for every dollar of disposable income.  Canada’s corporate debt-to-income level now stands at 315%.  A growing amount of that borrowing is being done through the U.S. bond market and being paid in U.S. dollars.  Smaller firms and those with lower credit ratings are turning to the syndicated loan market, which could subject them to the changing whims of investors.

Bank of Canada governor Stephen Poloz is more confident about what is happening in housing.

“New measures have curbed borrowing, reduced speculative behaviour in housing markets and made the financial system more resilient,” he said in the report.

“While the fundamentals in the housing sector remain solid overall, and the sector should return to growth later this year, we continue to monitor these vulnerabilities closely.”  By First National Financial. 

Creeping rate cut speculation

In the run up to this week’s rate setting by the Bank of Canada, talk of a coming rate cut is creeping into the forecast.

A recent Reuters poll of 40 economists put the chances of a cut, within the next 12 months, at 40%.  However, the same poll but the chances of a cut, within this year, at about 20%.

Many of the economists cite global trade uncertainties – which are stalling economic growth in Canada and other countries – as the key trigger for a possible 25 basis-point reduction.  Most of the concern centres on the current China – U.S. tensions and the potential for a recession in the States rather than domestic, Canadian, factors.

Realistically, it is unlikely there will be any interest rate movement – down or up – in Canada before 2020.  The BoC is calling for moderate GDP growth through the second half of this year.  As well, the politics surrounding the October federal election will keep the bank on the sidelines.

In a separate Reuters poll, property market gurus predict home prices will remain in the doldrums for the rest of 2019.  They are forecasting a little breeze next year that will push prices up by about 1.7%, which will barely meet the rate of inflation.  The Canadian Real Estate Association is forecasting a 1.6% decline in sales for this year, with a 2.0% increase in 2020.

The market-watchers polled by Reuters point to debt-burdened consumers as the key reason for the slowdown.  By First National Financial. 

Toronto is steadily becoming a sellers’ market – TREB analysis

Toronto is in a gradual trajectory towards being a sellers’ market, with home sales last month shooting up and supply remaining virtually static.

According to latest figures from the Toronto Real Estate Board, the city saw 9,989 home sales through the Board’s MLS System in May. This represented an 18.9% increase from the 15-year low for the month, which was seen last year.

TREB president Garry Bhaura emphasized, however, that last month’s numbers are still markedly below the long-term May average of 10,300, despite the tangible improvements from the glacial pace at the beginning of 2019.

“Sales activity continues to be below the longer-term norm, as potential home buyers come to terms with the OSFI mortgage stress test and the fact that listings continue to be constrained relative to sales,” Bhaura explained.

On the whole, the market is still seeing a positive trend, the Board head assured.

“After a sluggish start to 2019, the second quarter appears to be reflecting a positive shift in consumer sentiment toward ownership housing. Households continue to see ownership housing in the GTA as a quality long-term investment as population growth from immigration remains strong and the regional economy continues to create jobs across diversity of sectors.”

In comparison, listings ticked up by a mere 0.8%, ending up at 19,386 properties for sale. Intensified market competition pushed sales prices up by 3.6% annually, up to an average of $838,540. Said increases in value considerably outpaced the year-over-year gains seen in April (1.9%) and March (0.5%).

TREB warned that while the market can absorb single-digit annual price increases, continued scarcity in housing supply could aggravate price growth to unsustainable levels.

“This potential outcome underpins calls from TREB and other housing industry stakeholders to address roadblocks preventing a more sustainable and diverse supply of housing reaching the market,” the Board’s chief market analyst Jason Mercer stated.

“Many households are not comfortable listing their homes for sale because they feel that there are no housing options available to better meet their needs.”  By Ephraim Vecina.

Economic Highlights

Another Strong Employment Report Signals Rebound In Canadian Economy  

It appears that the Bank of Canada’s optimism that the Canadian economy’s growth will pick up in the third and fourth quarters of this year is well founded. Not only was the employment report very robust for two consecutive months, but the jobless rate has fallen to its lowest level since at least 1976.

Also, Canada’s trade deficit, reported today, hit a six-month low in April, as exports continue to rebound from a recent slump. Consumer spending and business investment are also making a big comeback. Household spending has accelerated, despite concerns over bloated debt loads, assisted by easing rates on loans, substantial jobs gains, stabilizing housing markets and improving financial markets.

The Bank of Canada forecasts that growth will accelerate to an annualized 1.3% in the second quarter–following the meagre 0.4% expansion in Q1–and pick up further in the second half of this year, before accelerating back to above 2% growth by 2020. This comeback begs the question–why were markets expecting a rate cut by the bank in December? That expectation may well change after this morning’s Statistics Canada releases. Of course, one caveat remains, which is the uncertainty surrounding a trade war with China and Mexico. If the trade situation were to worsen, Canada’s economy would undoubtedly be sideswiped.

Canadian employment rose by 27,700 in May, bring the number of jobs created over the past year to a whopping 453,100. The jobless rate plunged to 5.4%, from 5.7% in April, the lowest in data going back to 1976. Economists had been forecasting employment to rise by only 5,000 last month after Canada recorded a record gain of 106,500 in April. The loonie jumped on the news.

The composition of the job gain was particularly heartening, as the rise was all in full-time employment. On the other hand, jobs by those who are self-employed increased by 61,500–the gig economy is alive and well.

The most substantial job gains were in Ontario and BC.

Wage growth continued to be strong in May as pay gains for permanent workers sere steady at 2.6%.

In direct contrast, the US jobs report, also released today, was weaker than expected. US payrolls and wage gains cooled as Trump’s trade war weighed on the economy. US employers added the fewest workers in three months, and wage gains eased, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth.  

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates have dropped between 10-15 basis points in the last two weeks.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not a significant enough spread between the fixed and variable to justify the risk for most.

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

24 Apr

Residential Market Update


Posted by: Adriaan Driessen

Industry & Market Highlights 

Rate hike disappears over the horizon

The likelihood of a Bank of Canada interest rate increase appears to be getting pushed further and further beyond the horizon.

The Bank is expected to remain on the sidelines again this week when it makes its scheduled rate announcement on Wednesday.

A recent survey by Reuters suggests economists have had a significant change of heart about the Bank’s plans.  Just last month forecasters were calling for quarter-point increase in the third quarter with another hike next year.  Now the betting is for no change until early 2020.  There is virtually no expectation there will any rate cut before the end of next year.

The findings put the Bank of Canada in line with the U.S. Federal Reserve and other major central banks.  World economies have hit a soft spot largely due to trade uncertainties between China and the United States.  Canada is also being affected by depressed oil prices and a slowdown in the housing market.

Market watchers will be paying close attention to the Monetary Policy Report that comes with this week’s BoC rate setting.  Realtors and mortgage lenders have been pressuring for some loosening of the B20 stress test to allow some life back into the market.  The odds are against the Bank advocating for any easing.  Canadian households are still carrying record high debt loads and there are growing expectations of a recession within the next two years.  By First National Financial. 

New realities have home buyers adjusting

Canadian home buyers continue to accept and adjust to the new realities of the market, but that doesn’t mean they are happy about it.

A home ownership survey conducted earlier this year suggests nearly 40% of homeowners see themselves as being (or having been) “house poor”.  That means they are spending more than 30% of their total income on housing; mortgage, taxes, utilities and maintenance.  More than 90% of the respondents say that kind of money stress could have mental health effects.  While 51% say they would not put themselves in that position, just about all of the other half, 47%, say it would be worth the sacrifice.

This represents an opportunity for brokers who can provide practical advice, tailored to the needs of their clients.  Being available and providing information in real time goes a long way to easing anxiety and tensions for a home buyer.

The survey also shows signs that home buyers may be polarizing between those who believe they can go it alone and those who feel they are going to require financial help.   The number of buyers who feel they can go solo is 32%.  The number planning to get help from family is 28%.  The traditional model of buying a home with a partner or spouse has seen a decline, down to 42% compared to 49% in 2017.

The survey finds a full two-thirds of Canadians believe it is better to own than to rent.  By First National Financial.

Bond yield inversion: the case for calm

Anyone who has been watching knows that bond yields are falling and taking fixed rate mortgages with them.  The recent economic slowdown in both Canada and the U.S. has pushed down yields on five year government bonds on both sides of the border.  Those yields are used as the basis for setting interest rates on fixed mortgages.

An economic indicator known as the yield curve is has been getting a lot of attention lately.  The curve tracks the difference in the yields of short-term and long-term bonds.  Short-term can be as little as three months while long-term is 10 years or more.

Market watchers use the yield curve as a way to judge investor optimism about the future.  Long-term bonds traditionally offer better yields than short-term bonds.  The greater the difference between the short-end and the long-end of the curve, the greater the optimism about the future.

Occasionally though things get turned around and the yield curve “inverts”, with short-term bonds offering better yields than long-term.  Much is being made of this right now because it has happened, in both Canada and the United States, and it is widely viewed as bad news.

In the U.S., bond yield inversions have routinely been followed by a recession, in about a year.  But, like so much of what has happened over the past decade, this time is different.  Economists are nearly unanimous in downplaying the risk.  They point out that the inversion was not big enough and did not last long enough to trigger any alarms.  They also remind us that any possible recession will not happen overnight and is still a year away – plenty of time for action or a correction.  By First National Financial. 

Ottawa to strengthen National Housing Strategy 

The federal government announced Thursday that it is adding more strength to the National Housing Strategy.

The right to adequate housing for all Canadians will be supported by several key initiatives:

  • Requiring the adoption and maintenance of a National Housing Strategy (NHS), that prioritizes the housing needs of the most vulnerable and requires regular reporting to Parliament on progress toward the Strategy’s goals and outcomes.
  • Establishing a National Housing Council with diverse representation, including persons with lived experience of housing need and homelessness. The Council, supported by CMHC, will provide advice to the Minister on questions related to the NHS with the aim of improving housing outcomes.
  • Creating a Federal Housing Advocate, supported by the Canadian Human Rights Commission, to identify systemic housing issues facing individuals and households belonging to vulnerable groups, and provide an annual report to the Minister with recommended measures, which will be tabled in Parliament.

“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes. Our proposed human rights-based approach to housing, as well as the resource centre, will help strengthen the National Housing Strategy, ensuring that it delivers concrete results for the benefit of all Canadians,” said Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation.

Resource centre

Also announced, is a new resource centre from CMHC which will be managed by the Community Housing Transformation Centre to build a strong and resilient community housing sector.

CHTC will receive $68.6 million for administering the resource centre and two important initiatives under the NHS:

  • A Sector Transformation Fund to provide non-repayable contributions that support building a strong and resilient community housing sector.
  • A Community-Based Tenant Initiative to provide contributions to local organizations whose purpose is to assist people in housing need, support tenants in accessing information on housing options, and encourage better participation in housing decisions that affect them.

“When CMHC held public consultations to develop the Strategy, we heard that Canadians believe everyone deserves to have the dignity of a home. The most promising way to sustain this approach for future generations is to protect it through legislation. Enshrining the need for a National Housing Strategy in law inherently acknowledges the value of a coordinated approach, a shared vision and real accountability. It is a way to bring housing and “rights” closer together. This idea really is central to our thinking at CMHC: housing matters,” said Evan Siddall, President and Chief Executive Officer Canada Mortgage and Housing Corporation.  By Steve Randall.

Ontario Real Estate Association Releases 28 Reform Recommendations 

Levelling the playing field with builders and developers, eliminating unlicensed real estate “consultants” and getting rid of “bully offers” top the list of reforms that the Ontario Real Estate Association (OREA) is recommending to the provincial government.

OREA’s recommendations also include creating an education program for potential real estate professionals that requires more in-class training and specialization in areas like condominiums, industrial and rural or waterfront properties.

OREA says there is currently a two-tier system of consumer protection that exempts builders and developers from having to follow the rules that all real estate salespeople in Ontario must follow when trading in real estate. Real estate auctions, although rare, are also exempt from the protections.

The association is also demanding removal of the grey area in the legislation that allows unlicensed real estate “consultants” to operate in Ontario.

On the topic of bully or pre-emptive offers, “If a home listing includes an offer date, that’s the date on which all offers should be considered; an offer made before that date should not be allowed,” says Karen Cox, OREA president. “This will ensure that all interested buyers of a particular home get a fair shot at making an offer. For sellers, it means they will have a chance to work with their Realtor to carefully and thoughtfully consider all offers without feeling like they are in a pressure cooker.”

The recommendations also suggest eliminating escalation clauses, a provision that a buyer can use to beat competing offers by automatically topping any better offer with a previously stipulated amount.

“A clause that allows a buyer to automatically bump all other offers out of the running in a multiple offer situation makes for a very uneven playing field,” says Cox. “Further, for the escalation clause to kick-in, a Realtor must reveal private financial information such as the highest offer on a home to the buyer using the clause, which violates the Realtor Code of Ethics. Eliminating contradictory rules like this will strengthen consumer confidence in the province’s real estate market.”

In transactions where real estate salespeople are caught breaching the act that regulates real estate in the province, OREA is calling for a process called disgorgement, which would force rule breakers to pay back any income they made by unethical means.

Also among OREA’s recommendations:

  • Provide the option for a more transparent offer process.
  • Give The Real Estate Council of Ontario (RECO) the authority to proactively investigate the worst offenders and kick people who break the rules out of the profession. When an individual’s license is revoked, implement a “cooling off” period of at least two years before the offending individual can reapply for registration. All applicants with violent criminal convictions or fraudulent convictions defined under Section 380 of the Canadian Criminal Code within the last 10 years should be denied the privilege of working in real estate, with no right of appeal, says OREA.
  • RECO should be granted authority to establish administrative monetary penalties, or fines under $2,000, for a range of regulatory violations as an intermediary disciplinary
  • Ontario still does not allow salespeople and brokers from operating their businesses through professional corporations. OREA is calling for fair tax treatment for Realtors.
  • Amend legislation to permit specialty licensing classes for commercial, agricultural, condominium and other forms of real estate.
  • Replace the term “salesperson” with “agent” and replace the term “registrant” with “licensee”.

By REMonline.com

National House Price Index

Canada’s home prices continued their downward trend last month according to a leading measure.

The Teranet-National Composite House Price Index was down 0.3% in March compared to the previous month, marking its first decline for any March in its 20-year history with the exception of the 2009 recession.

The sixth monthly decline meant a cumulative drop of 1.7% across the surveyed markets.

Indexes were down month-over-month in seven of the 11 metropolitan markets surveyed – Ottawa-Gatineau (−1.5%), Victoria (−1.1%), Vancouver (−0.5%), Calgary (−0.5%), Toronto (−0.3%), Winnipeg (−0.3%) and Hamilton (−0.1%). Four markets were up: Halifax (0.8%), Quebec City (0.5%), Edmonton (0.4%) and Montreal (0.1%).

Many of these markets have been showing declining prices for many months; including Calgary for nine (-3.7% cumulative), Vancouver for eight (-4.3%), Victoria for six (-3.5%).

Montreal by contrast has only seen one decline in the past 12 months (with a 5.5% cumulative gain) and Halifax has advanced in each of the past five months (+2%).

The index shows a percentage movement in house prices with indices’ base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.

No collapse

The declining trend is not a sign that house prices are in free fall.

“In Toronto, Canada’s largest real estate market, apartment prices have been up for 17 consecutive months, while prices of other types of dwellings declined only 1.4% over the last 6 months. In Vancouver, the most expensive market, employment growing 2.9% in Q1 on a y/y basis should limit further home price declines,” the report says.

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March Home Sales Rebound From Dismal February Showing

Statistics released Monday by the Canadian Real Estate Association (CREA) show that national home sales edged higher in March following the sharp decline in storm-struck February. Overall, however, housing activity remains considerably below historical norms.

Home sales rose 0.9% nationally while the benchmark price rose 0.8%. While this is an improvement from the very poor showing in February, both sales and prices were down from a year earlier as homebuyers grapple with stricter mortgage rules and provincial actions, especially in British Columbia, to slow the housing market.

There was an even split between the number of markets where sales rose from the previous month and those where they fell. Among Canada’s larger cities, activity improved in Victoria, the Greater Toronto Area (GTA), Oakville-Milton and Ottawa, whereas it declined in Greater Vancouver, Edmonton, Regina, Saskatoon, London and St. Thomas, Sudbury and Quebec City.

On a year-over-year (y/y) basis, sales fell 4.6% nationally to its weakest level for the month since 2013. Existing home sales were also almost 12% below their 10-year average for the month of March (see chart below). Notably, home sales in B.C., Alberta and Saskatchewan were more than a whopping 20% below their 10-year average for the month. The slump is getting deeper in Vancouver, Calgary and Edmonton. All three markets saw further sales and price declines in March. Demand-supply conditions in Vancouver are now the weakest since the 2008-09 recession. By contrast, activity is running well-above average in Quebec and New Brunswick.

There was a slight pick-up in Toronto, yet the 1.8% sales gain recorded last month reversed just a fraction of the outsized 9.0% drop in weather-weakened February. A sixth consecutive decline in new listings in Toronto might have been a restraining factor.

Activity rebounded in Ottawa, while it was flat in Montreal. Both markets, along with Halifax, still boast the tightest demand-supply conditions in Canada. Benchmark prices there continue to track higher at solid rates.

“It will be some time before policy measures announced in the recent Federal Budget designed to help first-time homebuyers take effect,” said Jason Stephen, CREA’s President. “In the meantime, many prospective homebuyers remain sidelined by the mortgage stress-test to varying degrees depending on where they are looking to buy.”

“March results suggest local market trends are largely in a holding pattern,” said Gregory Klump, CREA’s Chief Economist. “While the mortgage stress test has made access to home financing more challenging, the good news is that continuing job growth remains supportive for housing demand and should eventually translate into stronger home sales activity pending a reduction in household indebtedness,” he added.

New Listings

The number of newly listed homes rose 2.1% in March. New supply rose in about two-thirds of all local markets, led by Winnipeg, Regina, Victoria and elsewhere on Vancouver Island. By contrast, new listings declined in the GTA, Ottawa and Halifax-Dartmouth.

With new listings having improved more than sales, the national sales-to-new listings ratio eased to 54.2% from 54.9% in February. This measure of market balance has largely remained close to its long-term average of 53.5% since early 2018.

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 2019.

There were 5.6 months of inventory on a national basis at the end of March 2019, in line with the February reading and one of the highest levels for the measure in the last three-and-a-half years. Still, it is only slightly above its long-term average of 5.3 months.

Housing market balance varies significantly by region. The number of months of inventory has swollen far above its long-term average in Prairie provinces and Newfoundland & Labrador; as a result, homebuyers there have an ample choice of listings available for purchase. By contrast, the measure remains well below its long-term average in Ontario and the Maritime provinces.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) declined by 0.5% y/y in March 2019. It last posted a y/y decline of similar magnitude in September 2009.

Among benchmark property categories tracked by the index, condo apartment units were the only one to post a y/y price gain in March 2019 (+1.1%), while townhouse/row unit prices were little changed from March 2018 (-0.2%). By comparison, one and two-storey single-family home prices were down by 1.8% and 0.8% y/y respectively.

Trends continue to vary widely among the 18 housing markets tracked by the MLS® HPI. Results remain mixed in British Columbia, with prices down on a y/y basis in Greater Vancouver (-7.7%) and the Fraser Valley (-3.9%). Prices also dipped slightly below year-ago levels in the Okanagan Valley (-0.8%). By contrast, prices rose by 1% in Victoria and by 6.4% elsewhere on Vancouver Island.

Among Greater Golden Horseshoe housing markets tracked by the index, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+6.6%), the Niagara Region (+6.0%), Hamilton-Burlington (+3.7%) the GTA (+2.6%) and Oakville-Milton (+2.3%). By contrast, home prices in Barrie and District held below year-ago levels (-6.1%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 4.9% in Calgary, 4.4% in Edmonton, 4.6% in Regina and 2.7% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply become more balanced.

Home prices rose 7.6% y/y in Ottawa (led by a 10.4% increase in townhouse/row unit prices), 6.3% in Greater Montreal (led by an 8.1% increase in apartment unit prices) and 2.1% in Greater Moncton (led by a 12.9% increase in apartment unit prices). (Table below).

Bottom Line:

The absence of a sharp snapback in activity at the beginning of the all-important spring season in March clearly points to the mortgage stress test, market-cooling measures in BC, economic uncertainty in Alberta and stretched affordability as continuing to exert significant restraint on homebuyer demand. The bad weather’s effect on February sales may have been limited after all. This means that the spring season may not have much upside to offer this year. In coming months, the recent declines in mortgage rates should ease the stress test for some buyers and we will see if first-time home buyers decide to put their plans on hold until more details on the federal government’s First-Time Home Buyer Incentive become available.

It has become increasingly apparent that the taxes levied in Vancouver targetting foreign buyers, empty homes, and high-end properties have sent Vancouver’s luxury housing market reeling. Prices in West Vancouver, one of Canada’s richest neighbourhoods, are down 17% from their 2016 peak. The slowdown is broadening: home sales in March were the weakest since the financial crisis as the benchmark prices fell 8.5% from their record last June. Bloomberg News published the following story today:

“It’s become more costly to both buy and own expensive homes (in Vancouver), particularly for non-resident investors and foreigners. To get a sense of the impact from the municipal, provincial and federal measures, take as a hypothetical example, the province’s most valuable property: the C$73.12 million ($55 million) house belonging to Vancouver-based Lululemon Athletica Inc. founder Chip Wilson. A foreign purchaser of the home who leaves the property empty for much of the year would end up paying as much as C$20.8 million in taxes as follows:

Taxes on purchase:

  • Foreign buyers’ tax of 20%: C$14.6 million surcharge on top of the sales price
  • Property transfer tax rate climbs to 5% on most expensive homes: C$3.7 million

Ownership taxes:

  • Municipal vacancy tax of 1% on assessed value: C$731,200 a year
  • Provincial speculation and vacancy tax, 2% of assessed value: C$1.46 million a year
  • Provincial luxury home tax known as the additional school tax of 0.2% to 0.4% of assessed value: C$278,480 a year

Additional government moves:

Federal rules tightening mortgage lending made it harder to obtain larger mortgages and harder for foreign buyers to borrow

Proposed legislation will expose anonymous Vancouver property owners in a public registry to stymie tax evasion, fraud and money laundering.”

It is not surprising, therefore, that Asian investment–a stalwart part of the Vancouver real estate market for decades–has dropped sharply. “Chinese investors are retreating globally following government restrictions on capital outflows in 2016. In Vancouver, Asian investment dropped off even more last year due in part to a series of new taxes instituted by the government, including a speculation and wealth tax on homes. The province has also proposed a bill to expose hidden landowners — both residential and commercial — and failure to disclose may result in a fine of C$100,000 or 15% of the property’s assessed value, whichever is greater. This is apparently already driving away some investors.” Bloomberg News has reported that at least some Chinese money is being diverted from the Vancouver market to Toronto as shown in the following Bloomberg chart.

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

Realtors & Short Term Rentals

Last week, the Travel Industry Council of Ontario (TICO) and Real Estate Council of Ontario (RECO) confirmed the right of real estate brokerages to transact short-term rental properties.

Another advocacy win for REALTORS®.

Thanks to this ruling, our members will not have to register as travel agents in order to transact vacation properties provided they do it through their brokerage – saving members thousands of dollars in costs and dozens of hours taking courses/passing exams!

Going forward, OREA will be working with Minister Bill Walker and his team to address the issue for the long-term as part of the Province’s updates to REBBA.

Read OREA’s statement here.

Read the RECO bulletin here.

Read the TICO bulletin here.

Mortgage Update - Mortgage Broker London

Economic Highlights
Bank of Canada maintains overnight rate target at 1 ¾ per cent
The Bank of Canada today maintained its target for the overnight rate at 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.
Monetary Policy Report – April 2019
The Bank’s new forecast calls for real economic growth of 1.2 per cent this year, 2.1 per cent next year and 2.0 per cent in 2021.
IMF’s predictions regarding the economy are too optimistic  
The International Monetary Fund’s predictions of the Canadian economy’s prospects for next year are far more optimistic than what is warranted by current figures, Deloitte Canada chief economist Craig Alexander stated.
In its latest outlook, the IMF pulled back its growth estimate for Canada to 1.5% this year, down from the 1.9% forecast in January.
However, Alexander contested the IMF’s prediction of a Canadian recovery of 1.9% in 2020, which will accompany an expected global growth of 3.6% that year.
“They’re too optimistic,” he told the Financial Post. “The reality is that many people’s expectations of what represents good growth are actually too high.”
The economist projected that Canadian GDP will grow by 1.3% in 2019, and then only a miniscule gain to 1.5% in 2020.
An important factor working through the market is the steadily increasing overall debt level, which has hobbled the purchasing power of a significant proportion of consumers, Alexander explained. The latter aspect is especially apparent in the precipitous decline of large retail and real estate purchases.
Moreover, businesses have by and large adapted conservative investment strategies for the time being, mainly due to global turmoil in financial markets. A long-term goal of surviving in this environment should push Canada to make its tax and regulatory regimes conducive to further competition and investment, Alexander stressed.
Earlier this month, Bank of Canada Governor Stephen Poloz assured that Canada’s economic slowdown will ultimately be a fleeting state of affairs. He cited modest economic growth at the beginning of the year, along with a flexible exchange rate, as elements buttressing the nation’s fundamentals.
“There are challenges in the Canadian and global economies that we need to manage, but there are clear signs that Canada is adjusting to the challenges,” Poloz said. “Recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.”  By Ephraim Vecina.
BoC gov’s decision today likely to lead to ‘prolonged pause’
BoC governor Stephen Poloz will most likely set the stage for a lengthy pause on interest rate hikes today, according to analysts surveyed by Bloomberg.
The benchmark overnight rate is expected to stay at 1.75%, amid the more troubling impacts of a sustained economic slowdown aggravated by slower global growth and a cross-Pacific trade war.
Such a decision would be the fourth consecutive hold by the bank.
“The Bank of Canada is still one of the most hawkish central banks globally, and I expect Governor Poloz is going to want to maintain some optionality [to raise rates],” Manulife Asset Management head of macroeconomic strategy Frances Donald said, noting that this stance will give the central bank the tools that it will need to stave off “another borrowing binge.”
“Full capitulation like we’ve seen from the Federal Reserve or the European Central Bank in my view is unlikely,” Donald added.
Earlier this month, Poloz asserted that the Canadian economy will still benefit from the boost that low borrowing costs can provide, considering the current environment of global economic uncertainty.
“That is why we said at our last interest rate announcement in March that the economic outlook continues to warrant a policy interest rate that is below the neutral range to help the economy work through this downshift in growth and keep inflation close to target,” Poloz stated back then, as quoted by BNN Bloomberg.
“There are challenges in the Canadian and global economies that we need to manage, but there are clear signs that Canada is adjusting to the challenges… “Recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.”  By Ephraim Vecina.

Mortgage Interest Rates

No change to Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates have dropped between 5-10 basis points in the last two weeks.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not significant enough spread between the fixed and variable to justify the risk for most.


Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.

10 Apr



Posted by: Adriaan Driessen

Industry & Market Highlights 

Federal budget’s housing measures miss the mark

Incentives in the federal budget for first-time homebuyers crippled by soaring housing costs could worsen affordability woes.

“It’s all about increasing demand for housing without doing much to increase supply, and you don’t need to be an economist to know that if you increase demand without increasing supply, you’ll end up with higher house prices, which is the oppose of the intention,” said Sherry Cooper, Dominion Lending Centres’ chief economist.

Rather than encouraging more buyers to compete for inadequate housing inventory, Cooper believes construction inducements would have been more beneficial.

“The government could have done things to increase supply, like changing the rules around zoning and the Greenbelt to open up more land,” she said. “They could even subsidize housing construction or eliminate some of the red tape and other delays in construction. There are other things that could have been done to incentivize the construction of new housing.”

Instead, the federal government introduced the First-Time Home Buyer Incentive, in which the Canada Mortgage and Housing Corporation will provide first-time buyers up to 10% of the purchase price of a new construction home, and 5% of a resale. Beyond that, a crucial question remains unanswered.

“It remains unclear whether the government would take an equity position in the home or whether this would act as an interest-free loan,” said James Laird, president of CanWise Financial. “This is an important distinction because if the government is taking an equity stake in a home, the amount that the homeowner would have to pay would grow as the value of the home increases.”

Added Cooper: “It appears they’re calling it a shared equity mortgage, which means you pay off the loan when you sell the house. It may well be that you pay off 10% or 5% of the sale price as opposed to that of the purchase price, so we don’t know the details yet, but one needs to consider whether you’re also sharing appreciation—the equity you have in your home—when you sell it. Or, for that matter, even a loss.”

One of B-20’s biggest criticisms is that it’s burdened housing markets across the country with a remedy tailored for the Vancouver and Toronto markets. The budget’s First Time Home Buyer Incentive demonstrates the federal government is both aware of the misstep and committed to rectifying it.

“The government has also placed limits on the First-Time Home Buyer Incentive, including a maximum household income of $120,000, and alluded to putting a ceiling on the program’s qualifying home price,” said Laird. “These criteria demonstrate that this program is aimed at Canada’s small- and medium-sized housing markets, as opposed to major urban centres where many households will exceed the maximum income threshold.”

Still, other housing measures in the budget are confounding. The RRSP Home Buyers’ Plan increased the withdrawal amount to $35,000 from $25,000, however, Laird worries it’s short-sighted.

“This program modification will be helpful in getting Canadians into their first home but will also be a burden because the loan has to be repaid within 15 years, including a minimum of one-fifteenth per year,” he said. “This means that, in the years following their home purchase, a homeowner has the additional responsibility of repaying their RRSP.”  By Neil Sharma.

First-Time Home Buyer Incentive reduces qualifying power  

A major item from this week’s federal budget will further reduce, rather than enhance, affordability for first-time homebuyers.

The First-Time Home Buyer Incentive—in which the Canada Mortgage and Housing Corporation will provide up to 10% on the purchase price of a new build and 5% on a resale—caps household income at $120,000. The policy further states that “participants’ insured mortgage and the incentive amount cannot be greater than four times the participants’ annual household incomes.”

First-time buyers who think the incentive raises their qualifying power are in for a surprise. Under current qualifying criteria, including the stress test, buyers qualify for homes that are 4.5-4.7% their household income. By using the First-Time Home Buyer Incentive, they would reduce their qualification amount by 15%.

“The total a first-time homebuyer gets between their mortgage and the incentive they receive from the government can’t exceed four times their household income,” said James Laird. “This qualifying criteria is actually stricter than the regular qualifying criteria that exists today. I was surprised the policy itself was launched like this since that section of the budget is called ‘Affordability’ and it actually reduces affordability.”

According to calculations provided, a household with $100,000 of income that puts a 5% down payment on a home, totalling $23,994, qualifies for a $479,888 home. However, with CMHC insurance, that amount declines to $474,129 with a monthly mortgage payment of $2,265.

If the same household participating in the First-Time Home Buyer Incentive uses the maximum purchase price, it qualifies for $404,858. If it uses the minimum down payment of 5% at $20,242, the total mortgage amount becomes $400,000 with a $1,911 monthly mortgage payment.

“The number one issue facing first-time homebuyers is how much they qualify for, not the monthly payment after the home closes, and that’s what this is aimed at,” continued Laird. “They qualify for less if they use this program.”

That might not be the only problem with the First-Time Home Buyer Incentive. A similar program launched by British Columbia’s Liberal government was axed last March by the NDP after it was revealed that only around 3,000 homebuyers used it—far fewer than the expected 42,000.

“Given the evidence provided through one of the largest provinces in the country trying a program that didn’t work, I’m not sure what the federal government thinks will be different,” said Laird, adding that housing measures in the budget were spare on details.

“I was amazed that one of the key parts of their budget hadn’t been properly thought through and didn’t contain detail. I expect that before this program actually goes live, one, we’ll get more detail, and two, it will be amended to take care of this issue.” 

Lower mortgage rates as bond yield inverts 

The current decline in the bonds market is good news for Canadian fixed-rate mortgage borrowers with rates heading lower.

As the bond market yields invert – as they did Monday in Canada – the cost to banks of borrowing in the market declines, meaning they are able to finance mortgages at a lower rate and pass savings on to customers.

It’s not all good news though because the inverted yield, also seen in US bonds, is often a foreteller of weakening economic conditions and potentially recession.

However, this risk is likely to mean that the BoC will remain highly cautious of increasing interest rates.

An outlook from TD Economics’ Beata Caranci and James Orlando suggests that Canada may need “the real interest rate to remain close to or below zero for a long period” with the deleveraging process only just starting.

There is a growing cohort of investors and analysts that believe the BoC’s next move on rates will be a cut and that is proving good news for variable rate mortgage borrowers too.

Janine White, vice-president of Ratesupermarket.ca told CBC News that rates will climb in the next couple of years but “for the rest of 2019 the prediction is that the variable rate is going to be stable and maybe has a chance of coming down.”  By Steve Randall. 

Residential Market Commentary – Budget Help for House Hunters

The new federal budget certainly got the attention of house hunters, realtors and mortgage professionals.  Unfortunately the announcement turned into a cliff-hanger and we will have to wait for the next episode to find out what is really going to be delivered.

The budget contains two key components aimed at addressing affordability concerns and making it easier for first-time buyers to get a home.

The first is a straight-forward expansion of the current “Home Buyer’s Plan” that allows the use of RRSP money for a down payment.  The maximum amount of the RSP withdrawal has been bumped up from $25,000 to $35,000 – but the 15-year pay-back period is unchanged.

The second component is more complicated and some important details were left unexplained in the budget.  The “First Time Home Buyer Incentive” amounts to an interest-free loan from Canada Mortgage and Housing Corporation.  There are several conditions but it allows CMHC to take an equity stake in a qualifying mortgage.  The money will be paid back to CMHC when the property is sold, or sooner if the owner choses.

The cliff-hanger is: how much money will go back to the housing agency.  Does the homeowner pay back the amount borrowed, or does CMHC get a share of the increased value of the property?  Conversely, if the property value drops does CMHC share in the loss, or is the owner still liable for the full amount of the original loan?  The answers are supposed to come in the fall.

Several prominent economists point out, that neither program actually makes housing more affordable.  They merely add to the options for taking on debt that will have to be repaid.  By some calculations the FTHBI might even decrease the maximum amount a buyer can qualify for.

Mortgage professionals and realtors have their own concerns, particularly about the delay in getting the details delivered.  They worry that leaving the announcement until the fall could hobble the spring buying season as house-hunters wait to find out if they will be able to benefit from the federal programs. By First National Financial.

Economic Highlights

Canadian mortgage rates are falling as bond yields slide lower  

Yield on 5-year government debt has dipped below 1.5%, its lowest level since 2017.  What’s bad news for some is good news for others, and Canadian mortgage-holders are the unexpected beneficiaries of some of the gloom that’s hovering over Canada’s economy.

Fixed mortgage rates have been falling precipitously in recent weeks, as the cost of financing those loans has gotten cheaper. Banks and other lenders get the money that they loan out in mortgages by borrowing it themselves on the bond market, and the yields on five-year bonds have been falling since May 2018.

A five-year Government of Canada bond was yielding just 1.45 per cent on Monday. That’s the first time the figure has been below 1.5 per cent since the summer of 2017.

Last week, the yield curve on long-term lending versus short-term inverted, a rare event that has an uncanny knack for predicting recessions. (For a longer explanation on what an inverted yield curve means, read this.)

Bond yields are heading lower largely because investors think the prospects for the economy are looking dim, so they expect interest rates to start moving lower.

Lower bond yields are generally “not a good sign from an economic standpoint,” says Janine White, vice-president of rate comparison website, Ratesupermarket.ca, “but it’s great for mortgage borrowers.”

That’s because cheaper financing costs are allowing the banks to cut their mortgage rates to try to entice borrowers. 

Royal Bank has since cut that rate two more times, first by 10 basis points on March 1 and then by another 15 basis points on March 13. The bank’s five-year fixed rate is now at 3.49 per cent, and other lenders are indeed following suit.

TD Bank currently has a special five-year fixed rate of 3.49 per cent. Smaller lenders are even lower. Dominion Lending Centres is offering 3.29 per cent locked in for five years, while HSBC Canada has a special five year of 3.24 per cent at the moment.

Variable rates moving lower too

And it’s a similar story on the variable rate side — albeit for different reasons.

Unlike fixed rate mortgages which take their cues from the bond market, variable rate mortgages tend to move in conjunction with whatever the Bank of Canada is doing.

And investors are betting that the central bank will soon be moving its rate down, not up. Investors in financial instruments known as overnight index swaps are pricing in zero chance of a hike this year, but about a one-in-five chance of a cut by July, and up to a 44 per cent chance by September.

White says the variable-rate mortgage market is simply pricing in some of the negative economic indicators of late, including lower inflation and an anemic GDP number that showed Canada’s economy actually shrank to close out 2018.

“There’s an increased probability they will actually cut to try to fuel economic growth,” White said, of her expectations for Canada’s central bank.

One of the biggest shifts that occurred in our quarterly March forecast was the removal of any further interest rate hikes from our outlook.

And economists are predicting the same thing.

“One of the biggest shifts that occurred in our quarterly March forecast was the removal of any further interest rate hikes from our outlook,” TD Bank’s chief economist Beata Caranci said in a note on Monday. “We hit the stop button.”

Variable rates have not just stopped going up, they’ve shifted into reverse and gone down in some cases. Rates below three per cent are now common, both at the big banks and at alternative lenders.

The spring is always a key time in the mortgage markets. That’s because the lion’s share of home purchases happen in those months, so lenders try to compete as much as possible on rates to take as big a bite as they can of that business.

Given that, the sudden trend towards cheaper lending could well stick around for a bit, White says.

“Are we still going to be headed for interest rate increases in the next couple of years? Yes,” she says. “[But] for the rest of 2019 the prediction is that the variable rate is going to be stable and maybe has a chance of coming down.”  By Pete Evans, CBC News.

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates have dropped between 10-15 basis points in the last two week.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages somewhat attractive, but still not significant enough spread between the fixed and variable to justify the risk for most.

This edition of the Weekly Rate Minder shows the latest rates available for Canadian mortgages. At Dominion Lending Centres, we work on your behalf to find the best possible mortgage to suit your needs.

Explore mortgage scenarios using helpful calculators on my website: http://www.iMortgageBroker.ca

Other Industry News & Insights

Roundup of the latest mortgage and housing news.

From Mortgage Professionals Canada.

20 Mar



Posted by: Adriaan Driessen

London Mortgage Broker – Market Update

Industry & Market Highlights 

Liberal Government Woes & Housing   

After two years of continuous rule changes reducing home owners purchasing power, creating a massive affordability gap, and stealing the future wealth from first time homeowners now unable to purchase their first home – the new Federal budget includes first-time buyer incentives.

It’s hard not to see this as a public opinion political stunt on the eve of a federal election this fall.  Real Estate and Mortgage Industry professional associations have been telling the liberal government for the past two years they have made a wrong move. To top it off, The Justice Committee met behind closed doors to decide whether Canadians could hear the whole story on the SNC-Lavalin scandal. Unsurprisingly, the Liberals used their majority to cover it up. And now, Justin Trudeau plans to use his pre-election, big deficit budget to get his corruption scandal out of the newspaper headlines.  Don’t you just love honestpoliticians… Oh Canada! See more HERE.

Mortgage Professionals Canada Federal Budget 2019 Housing Market Overview  

Mortgage Professionals Canada welcomes aspects of the housing affordability component of today’s Federal Budget.

The announcement of a new CMHC First-Time Home Buyers Incentive Plan represents a shared equity mortgage program that would give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of buying a home with CMHC.

The incentive would provide funding (equity sharing) of up to five percent of the purchase price of an existing home, or 10 percent of a newly constructed home. No ongoing monthly payments are required. The buyer would repay the incentive, for example at resale. The government has budgeted up to $1.25 billion over the next three years to support this program.

For example, if a borrower purchases a $400,000 home with five per cent down and a five per cent CMHC shared equity mortgage ($20,000), the size of the borrower’s insured mortgage would be reduced from $380,000 to $360,000, helping to lower the borrower’s monthly mortgage bill. This would make it easier for Canadians to buy homes they can afford.

The program limits eligibility to households earning a maximum of $120,000 annually, and lets them borrow no more than four times their annual household income. This limits a home purchase to roughly $505,000. This Incentive Plan will be discussed more fully in the coming days, but it is not expected to begin until fall, 2019. In principle, the increased equity share eligibility for newly constructed homes will help incent new construction and supply across Canada.

Further analysis is needed, however, some aspiring homebuyers, especially at the lower end of the economic ladder, will have greater opportunities to purchase a home with the assistance of this new program.

Also of note is an increase in the eligible RRSP withdrawal amount through the Home Buyers’ Plan (HBP). Previously $25,000, this has been increased to a maximum to $35,000.

The budget included a lengthy defense of the current stress tests but does suggest that adjustments may be made in future. We will continue to discuss this issue with policymakers.

While we did not see immediate movement on the stress tests, and the new Home Buyers Incentive Plan can be seen as an alternate and more targeted response than an insurable 30 year amortization, we are encouraged by the announcements made today.

The forthcoming federal election will provide opportunities to continue the conversations with policymakers and candidates in the coming months. We will continue our ongoing market analysis and maintain our support for a stable housing market for our members and their customers.

Residential Market Commentary – Less Wealth as Debt to Income Grows again

Canadian households are a little poorer and a little deeper in debt.  The latest numbers from Statistics Canada show the country’s national wealth diminished and the infamous debt-to-income ratio increased in the fourth quarter of 2018.

The net worth of the household sector dipped 2.8% in the final three months of last year, to $10.74 billion.  The slowing housing market was a factor but the main cause was a drop in the value of “financial assets”, led by a 7.5% decrease in the price of stocks and other investment fund shares.

The fourth quarter of 2018 was the worst quarter for real estate since Q4-2008.  A 1.4% decline in the value of residential real estate is pegged with leading an overall drop of 1.0% in the value of “non-financial” assets.  In general real estate is the biggest non-financial asset for any household.

Canada’s worrisome household debt-to-disposable-income ratio edged up again at the end of 2018.  It is now 178.5%, or $1.79 in debt for every $1.00 that is left after all of the other bills are paid.  Most of that increase was triggered by mortgage borrowing.  Demand for mortgage loans was up, while other consumer credit borrowing declined.  The Bank of Canada calls the high debt-to-income ratio the biggest domestic threat to the country’s economy.

StatsCan is offering some reassurance.  It points out that the first two months of this year have shown signs of a rebound.  Employment numbers for both January and February were far above expectations.  February also showed an uptick in wage growth the exceeded forecasts. By First National Financial.

Economic Highlights

Canadian Economy Hits a Major Pothole in Q4  

Stats Canada released disappointing figures showing that the economy barely grew in the final quarter of last year. Weakness in the oil sector was expected, but the downturn went well beyond the energy sector and bodes ill for a return to healthy growth this year.

The country’s economy grew by just 0.1% in the fourth quarter, for an annualized growth rate of 0.4%–the weakest performance since the second quarter of 2016, down from an annualized 2% pace in the third quarter and well below economist’s expectation of a 1% annualized gain.

For the year as a whole, real gross domestic product (GDP) grew at a 1.8% pace in 2018, down substantially from the 3% growth recorded in 2017. In comparison, the U.S. economy grew 2.9% last year with Q4 growth at 2.6%.

Canada’s economy was battered by lower export prices for crude oil and crude bitumen walloping Alberta. Housing activity in the province slowed from already weak levels as unsold inventories rose and prices edged downward. As well, business investment dropped sharply in the final three months of the year, and household spending slowed for the second consecutive quarter.

Consumer spending on durable goods, especially motor vehicles, hit the skids as overall household outlays for products and services weakened. Consumption spending grew at the slowest pace in almost four years.

Housing fell by the most in a decade, business investment dropped sharply for a second straight quarter, and domestic demand posted its most significant decline since 2015. Housing investment plummeted, falling at a 3.9% quarterly rate as the housing market continued to soften, with the most substantial decrease in new construction (-5.5% quarterly), followed by renovations (-2.7%) and ownership transfer costs (-2.6%). (*see note below)

Business investment in plant and equipment fell 2.9%, the sharpest drop since the fourth quarter of 2016.

The only thing that kept the nation’s economy from contracting was a build-up in inventories as companies stockpiled goods. Without a doubt, much of the inventory accumulation was unintended, as the slowdown in demand caught businesses by surprise.

Implications for the Bank of Canada

Canada’s economy has been plagued by trade uncertainties, reduced oil demand by the U.S., rising interest rates, and tighter mortgage credit conditions. Consumer and business confidence has declined, and inflation remains muted. Despite a relatively robust labour market, wage growth has slowed. The Bank of Canada is widely expected to stay on the sidelines next week when the Governing Council meets once again on Wednesday. The central bank’s latest forecast, from January, was for annualized growth of 1.3% in the fourth quarter, more than three times stronger than today’s reported pace of 0.4%. The Bank expects growth to decelerate further to 0.8% in the current quarter, before rebounding back to above 2% growth by next year.

The latest data puts the economy’s ability to rebound to more normal levels in question. Monthly data released today show the economy ended the year contracting, with December gross domestic product down 0.1%. Most economists now expect the Bank of Canada will refrain from raising interest rates for the remainder of this year.


*Housing investment in the GDP accounts is technically called “Gross fixed capital formation in residential structures”. It includes three major elements:

  • new residential construction;
  • renovations; and
  • ownership transfer costs.

New residential construction is the most significant component. Renovations to existing residential structures are the second largest element of housing investment. Ownership transfer costs include all costs associated with the transfer of a residential asset from one owner to another. These costs are as follows:

  • real estate commissions;
  • land transfer taxes;
  • legal costs (fees paid to notaries, surveyors, experts, etc.); and
  • file review costs (inspection and surveying).

Royal Bank Cautions Against Budget Measures to Increase Millennial Homeownership Demand

A new report hit my inbox yesterday written by Robert Hogue, a senior economist at the Royal Bank urging the federal government to withhold the expected support for millennial home purchases in the March 19th budget. Mr. Hogue writes that “Federal Finance Minister Bill Morneau is reportedly poised to unveil new budget measures to help more Canadian millennials become homeowners. While that generation does face housing-related challenges, especially in some larger and more expensive Canadian cities, we urge him to tread carefully. On the surface, ideas like relaxing the mortgage stress test, extending the maximum amortization period for insured mortgages, or increasing the amount of RRSP take-out for a first home down payment might bring short-term relief to buyers. But they do nothing to address what we believe is the root of Canada’s housing woes: gaps in the mix of housing options in some of Canada’s larger markets. Meanwhile, the measures won’t address the issue of high household debt, and may actually inflate home prices.”

The bank economist takes “issue with the notion that Canada has a home ownership problem in the first place. On average, more than 40% of Canadian households under 35 years of age own their own homes. And the proportion of all Canadian households who own a home is one of the highest among advanced economies. Even Toronto and Vancouver—the least affordable markets in the country—rank near the top of global cities on home ownership and have home ownership rates that are about double cities like Paris and Berlin. And despite a notable decline in the past decade, the ownership rate among younger households (Canada’s millennials) remains not only high historically in Canada but also compared to other countries, including the U.S.”

I urge you to read the report. The data provided in the charts are compelling. The real problem is the dearth of supply of “starter” homes in Canada’s most expensive cities. The measures likely to be introduced in the budget will not address the housing supply gaps and could well further inflate prices. “What millennials in Vancouver and Toronto really need is more inventory of homes they can afford, and a better mix of housing options—be it to own or rent…. At the very least, the collective goal should be to remove barriers (regulatory, administrative or otherwise) inhibiting home developers and builders to respond quickly to the demand for new housing—especially when that demand is rising rapidly.”  By Dr. Sherry Cooper. Chief Economist, Dominion Lending Centres.


Mortgage Interest Rates

Prime lending rate is at 3.95%.  The Bank of Canada Benchmark Qualifying rate for mortgage approval remains at 5.34%.  Fixed rates are slowly moving down again.  Some lenders are offering special promotional rates to try and take more market share.  Variable rate discounts are offered by some lenders making adjustable variable rate mortgages somewhat attractive.

Other Industry News & Insights
Roundup of the latest mortgage and housing news. 
From Mortgage Professionals Canada. 
There is never a better time than now for a free mortgage check-up.  It makes sense to revisit your mortgage and ensure it still meets your needs and performs optimally.  Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or simply want to know you have the best deal?  Whatever your needs, we can evaluate your situation and help you determine what’s the right and best mortgage for you.