20 Apr

Residential Market Update


Posted by: Adriaan Driessen

Canadian March Home Sales Posted Their Biggest Decline Since June

Statistics released today by the Canadian Real Estate Association (CREA) show that rising interest rates were already dampening housing activity well before the Bank of Canada’s jumbo spike in the key policy rate in mid-April. National home sales fell back by 5.4% on a month-over-month basis in March. The decline puts activity back in line with where it had been since last fall (see chart below).

New Listings

The number of newly listed homes fell back by 5.5% on a month-over-month basis in March, following a jump in February. The monthly decline was led by Greater Vancouver, the Fraser Valley, Calgary and the GTA.

With sales and new listings falling in equal measure in March, the sales-to-new listings ratio stayed at 75.3% compared to 75.2% in February. The long-term average for the national sales-to-new listings ratio is 55.1%.

About two-thirds of local markets were seller’s markets based on the sales-to-new listings ratio is more than one standard deviation above its long-term mean in March 2022. The other third of local markets were in balanced market territory.

There were 1.8 months of inventory on a national basis at the end of March 2022 — up from a record-low of just 1.6 months in the previous three months. The long-term average for this measure is more than five months.

Home Prices

The Aggregate Composite MLS® HPI was up 1% on a month-over-month basis in March 2022 – a marked slowdown from the record 3.5% increase in February.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up by 27.1% on a year-over-year basis in March. The actual (not seasonally adjusted) national average home price was $796,000 in March 2022, up 11.2% from last year’s same month.

Bottom Line

The March housing report is ancient history, as sharp increases in market-driven interest rates have changed the fundamentals. This report also precedes the 50 basis point hike in the overnight policy rate by the Bank of Canada. Anecdotal evidence thus far in April suggests that new listings have risen, and multiple bidding has nearly disappeared.

The rise in current fixed mortgage rates means that homebuyers must qualify for uninsured mortgages at the offered mortgage rate plus 200 bps–above the 5.25% qualifying rate in place since June 2021. This, no doubt will squeeze some buyers out of higher-priced markets. 

The federal budget introduced some initiatives to help first-time homebuyers and encourage housing construction–but these measures are hitting roadblocks. Labour shortages are plaguing the construction industry, and the feds do not control zoning and planning restrictions but at the local government level. The ban on foreign resident purchases will likely have only a small impact, so the fundamental issue of a housing shortage remains the biggest impediment to more affordable housing in Canada.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

13 Apr

Residential Market Update


Posted by: Adriaan Driessen

Bank of Canada Hikes Rates by 50 BPs, Signalling More To Come

The Governing Council of the Bank of Canada raised the overnight policy rate by a full 50 basis points for the first time in 22 years. This was a widely telegraphed action that will be followed by the US Federal Reserve next month. While the BoC was the first G-7 central bank to take such aggressive action, the Bank of New Zealand also hiked rates today by half a percentage point. Considering the surge in inflation and the strength of the Canadian economy, another jumbo rate hike may well be in the cards.

The Bank now realizes that inflation is coming, not just from supply disruptions but also from excessive demand. “In Canada, Growth is strong, and the economy is moving into excess demand. Labour markets are tight, and wage growth is back to its pre-pandemic pace and rising. Businesses increasingly report they are having difficulty meeting demand, and are able to pass on higher input costs by increasing prices.”

The Bank now says that “Growth looks to have been stronger in the first quarter than projected in January and is likely to pick up in the second quarter. Consumer spending is strengthening with the lifting of pandemic containment measures. Exports and business investment will continue to recover, supported by strong foreign demand and high commodity prices. Housing market activity, which has been exceptionally high, is expected to moderate”.

The Governing Council has, once again, revised up its inflation forecast. CPI inflation is now expected to average almost 6% in the first half of 2022 and remain well above the control range throughout this year. It is then expected to ease to about 2½% in the second half of 2023 and return to the 2% target in 2024. There is an increasing risk that expectations of elevated inflation could become entrenched. 

With the economy moving into excess demand and inflation persisting well above target, the Governing Council judges that interest rates will need to rise further. The Bank is also ending reinvestment and will begin quantitative tightening (QT), effective April 25. Maturing Government of Canada bonds on the Bank’s balance sheet will no longer be replaced, and, as a result, the balance sheet size will decline over time. This will put further upward pressure on interest rates further out the yield curve.

Bottom Line

Traders are betting that the overnight rate will approach 3.0% one year from today. In today’s Monetary Policy Report (MPR), the Bank revised upward its estimate of the neutral overnight rate to a range of 2.0% to 3.0%–up 25 bps from their estimate one year ago. This is the Bank’s estimate of the overnight rate that is consistent with the noninflationary potential growth rate of the economy.

The rise in interest rates has already shown signs of slowing the Canadian housing market. The MPR states that “Resales are expected to soften somewhat in the second quarter as borrowing rates rise. Low levels of both builders’ inventories and existing homes for sale should support new construction and renovations in the near term”.

Bond yields have risen in anticipation of the Bank of Canada’s move taking the five-year fixed mortgage rate up to between 3.5% and 4%. This could be a pivotal time, as mortgage borrowers must qualify for loans at the maximum of 5.25% or 2 percentage points above the offered contract rate. We are now beyond the  2 ppts threshold, which reduces the buying power of many.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres


2 Nov

Bank of Canada Responds To Mounting Inflation: Ends QE and Hastens Timing of Rate Hike

Latest News

Posted by: Adriaan Driessen

In an aggressive response to the rise in inflation, the Bank of Canada issues a hawkish press release affirming it is ending its bond-buying program (quantitative easing–QE) and accelerating its plans for the first hike in the overnight rate to Q2 or Q3 of next year. This would be the Bank’s first rate hike since September 2018–well before the pandemic began.

The Bank of Canada surprised markets today with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:
The Canadian economy has accelerated robustly in the second half.
Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can’t find appropriate workers quickly enough to meet demand.
Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
The Bank views the risks around this inflation outlook as roughly balanced.
In response to the Bank’s revised view, it announced that it is ending quantitative easing, shifting to the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds. The Bank now owns about 45% of all outstanding GoC bonds.

The Bank today held its target for the overnight rate at the effective lower bound of 1/4 percent. While this was widely expected, the Bank adjusted its forward guidance. It moved up its guidance for the first hike in the overnight rate target by three months, from the second half of 2022 to the middle quarters–sometime between April and September.

Bottom Line

Since the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.

The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank’s 1%-to-3% target band until late next year.

There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.

Concerning housing, the MPR says the following: “Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth”.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres


14 Sep



Posted by: Adriaan Driessen

Industry & Market Highlights

Surge in outstanding residential mortgage credit’: CMHC sees risk of delinquencies jumping

Canadians piled on mortgage debt even as COVID-19 forced the country into lockdowns, and Canada Mortgage and Housing Corporation (CHMC) worries many will eventually struggle to keep up with payments.

The national housing agency says total outstanding mortgage debt accelerated at the beginning of 2020 and into the first months of COVID-19 lockdowns in April and May. CMHC says the jump followed a relatively stable period in 2019.

”We observed a surge in outstanding residential mortgage credit in the first five months of 2020.

“This mortgage credit acceleration is a result of an increase in newly extended mortgages, given residential property sales were up late last year and early this year, and a record number of homeowners deferring their mortgage payments from impacts of pandemic-related economic shutdowns,” said Tania Bourassa-Ochoa, senior specialist, housing research at CHMC.

CMHC says six-month deferrals, offered in response to the pandemic, have resulted in 760,000 deferred or skipped mortgage payments across chartered banks. It estimates $1 billion per month has been deferred.

As the deferral period ends, CMHC says there is a higher risk of mortgage delinquencies in the third and fourth quarters.

It also says a string of interest rate cuts by the Bank of Canada has sparked an increased interest in variable rate mortgages.

Uninsured mortgages are getting more popular too and 63 per cent of mortgages from chartered banks were uninsured.

By Jessy Bains, Yahoo Finance Canada. Follow him on Twitter @jessysbains.  

Five reasons Canadians have little reason to fear a housing crash

Whether they take place during a pandemic-fuelled recession or during a period of sustained economic expansion, record-shattering home sales in Canada always seem to be accompanied by the same phenomenon: talk of the country’s “inevitable” housing crash.

Questioning the logic of homebuyers who engage in wild bidding wars in the midst of historic job losses is hardly unreasonable, but saying that behaviour will trigger a catastrophic fall in home prices, like the 18 percent decline projected as a potential outcome by the Canada Mortgage and Housing Corporation in May, is a train of thought Nick Kyprianou, president of RiverRock Mortgage Investment Corporation, is encouraging Canadians to abandon.

Talk of a crash in home prices has been persistent since CMHC first floated its dire 18 percent figure, even though neither CMHC nor any other housing authority, lender or brokerage has provided any evidence or metrics that tie current market activity or the economic slide caused by COVID-19 to plummeting home prices. And yet, the spectre of an 18 percent decline persists, hanging over the market like the reaper’s scythe, just waiting to harvest the souls and credit ratings of unfortunate Canadians.

Kyprianou is another market-watcher who can’t fathom the CMHC’s projection. His theory is that, in determining its absolute, institution-destroying, worst-case scenario as part of its annual report to the Office of the Superintendent of Financial Institutions, CMHC may have concluded that its own breaking point would come if home prices shrank by 18 percent.

“I think [CMHC CEO Evan Siddall] just spouted off the worst-case scenario,” Kyprianou says. “Well, the chance of the worst-case scenario is so remote, everything has to line-up perfectly – multiple times – for it to happen.”

Using five key metrics to compare the current economic situation to that which proceeded the last true housing crash in Ontario (1989-1995), Kyprianou says today’s consumers can remain confident that home values will largely maintain their strength, even as COVID-19 continues to cast its shadow over the Canadian economy.

1. Interest rates

“Interest rates are your biggest factor,” Kyprianou says “If interest rates keep going up, that’s the biggest burden on housing because your dollar just doesn’t go as far.”

Interest rates almost doubled during Ontario’s last crash, rising from from eight to fifteen percent, putting pressure not only on buyers but the province’s builders as well. That is simply not going to happen this time around. The Bank of Canada estimated that it may not raise its key interest rate target before 2022.

2. Unemployment

There is no question that Canada’s employment situation is a worry. Unemployment was 10.2 percent in August 2020, almost double the rate seen in August 2019. But Kyprianou says there’s more to the story than just the headline.

In the early 1990s, when unemployment was hovering around 11 percent, most of the jobs being lost belonged to high earners – middle management, skilled tradespeople, factory workers – who saw their employers close up shop and move their operations to countries like Mexico during the first rocky years of the North American Free Trade Agreement.

“When these jobs are evaporating and the bulk of the unemployed are the higher income earners, that is going to have an effect on housing,” Kyprianou says, adding that most of the labour disruption caused by COVID-19 has been proven to involve low-wage earners who are predominantly renters, not prospective home buyers.

“That’s a big dynamic change,” he says. “You just can’t look at what the unemployment number is. You have to drill down through it and look at who is unemployed.”

3. Equity

Much of the concern expressed by CMHC’s Siddall over Canadian debt levels and high-ratio mortgages is the risk of borrowers being dragged underwater if falling home prices leave them in a negative equity position. Fair enough. But Kyprianou, quoting statistics provided by Canadian Mortgage Professionals, says the vast majority of Canadians have far more than five percent equity in their homes.

In its most recent Annual State of the Residential Mortgage Market in Canada report, CMP found that 88 percent of Canadian homeowners have equity ratios of 25 percent or higher. Among the 6 million homeowners with mortgages, 81 percent have equity ratios of 25 percent or more.

Kyprianou says there is also the concept of emotional equity to consider. Defaulting on a mortgage is seen as an embarrassing failure most homeowners will do all they can to avoid. He saw many of them get resourceful during the last recession – taking on boarders, getting a second job, asking their families for assistance – as a means of making their monthly mortgage payments. He expects the same level of effort from today’s borrowers.

“You gotta make it work,” he says.

4. Taxes

In the early 90s, sky-high personal and corporate tax rates were deemed responsible for driving companies and individual professionals into the waiting arms of the United States. The resulting brain drain eventually led to lower tax rates in Canada, but the damage was done.

With unemployment high and business confidence muted, it is highly unlikely that taxes will see any kind of significant spike over the near-term. Canadians are likely to be up in arms when their CERB payments are taken into account come tax time next year, and the billions in government aid used to prop up the economy for six months will eventually need to be recouped, but it’s safe to say the feds won’t threaten the nation’s economic recovery – or their polling numbers – by implementing any significant new taxes.

5. Immigration

In the 1989-1995 downturn, the problem wasn’t a lack of new Canadians, it was an inability to keep them. The brain drain days are over, but by limiting international immigration, COVID-19 has thrown a wrench into the works. With just over 100,000 permanent residents being welcomed into the country in the first six-months of 2020, Canada has little chance of hitting its immigration target of 341,000 for the year.

Immigration has been a significant driver of all things good in Canada over the past several years – population growth, innovation, economic expansion, home sales – but Kyprianou doesn’t see a fall in immigration numbers having too negative an impact on home prices, largely because immigrants don’t tend to buy properties for the first two years after arriving in Canada.

“If the pandemic affects immigration for three years, it’s not going to be a problem,” he says. “If it’s just a year, year-and-a-half, it’s not going to be a problem.”

Canada’s reputation for being a stable presence in a chaotic world has also been strengthened by the country’s handling of the pandemic (and the humiliating failure of our neighbours to the south to do the same). Once recovered from COVID-19, the country should still offer the same opportunity for new arrivals to find not only a safe environment to raise their families, but high-paying jobs in growing industries like tech and financial services.

The only sub-market where Kyprianou sees prices softening is high-rise condos. But with so many investors having purchased rapidly appreciating pre-construction properties over the past five years, even those who may be forced to sell, like unlucky Airbnb operators, are unlikely to face a loss. If the average price per square foot in Toronto, for example, falls from its current level of approximately $1,100 to $900, anyone who purchased at $500 per square foot in 2015 will still be making a hefty profit.

“It’s not like there’s going to be a bloodbath,” Kyprianou says. “They just don’t make as much money if they have to sell.”  By Clayton Jarvis. 

Mortgage costs stay low, central bank keeps interest rate at rock-bottom level

The Bank of Canada announced today that it would be keeping its mortgage-market influencing policy rate at the record low 0.25 percent level with no sign that it would increase any time soon.

The policy rate, which has a major effect on how mortgage lenders set their rates, has been steady at 0.25 percent since March, when the central bank sprung into action with a dramatic series of rate cuts meant to support the economy during the early days of the pandemic.

A lot has happened since then, to say the least. The central bank, now led by recently appointed Governor Tiff Macklem, has repeatedly stated that its policy rate will remain ultra-low to continue supporting the country’s economic recovery. But the summer brought with it some significant signs that a healthy bounce back is underway, led by the country’s housing market.

This did not appear to faze the bank, according to Capital Economics’ Stephen Brown, who noted that the robust housing recovery only received a brief mention in today’s announcement.

“While home sales were admittedly still lower on a year-to-date basis in July than they were in 2019, the timelier local real estate board data for Toronto and Vancouver showed even further strong rises in sales in August,” wrote Brown.

“Moreover, as sales have surged by more than new listings, the nationwide sales-to-new listing ratio now points to very strong house price inflation, which is surely making at least some members of the [Bank of Canada’s] Governing Council nervous,” he continued.

Brown is alluding to the fact that the central bank wants to avoid a situation in which a sustained low interest rate environment causes home prices to skyrocket due to high demand driven by rock bottom borrowing costs.

Lenders have already been competing for mortgage market share by cutting fixed and variable rates that have now reached historic lows.

A renewed flurry of mortgage borrowing could exacerbate an already worrying pre-pandemic trend that saw Canadian household debt reach and remain at one of the highest levels recorded in developed countries. An event that triggers rates to rise rapidly or incomes to fall quickly — like a wind down of pandemic-related government support — could prove to be disastrous for many indebted households.

But despite these concerns it appears the Bank of Canada’s policy rate, and by extension, mortgage rates will remain low for a long time to come. As Capital Economics’ Brown wrote, the bank has essentially reiterated in today’s announcement that “interest rate rises are years away.”  By Sean McKay. 

What if we shut down again? Are you ready?

With such a hot market over these past few months, instead of sitting back and relaxing throughout the summer, most people have been really busy. That’s a good thing for sure.

As we start the fall market though, there is a lot of uncertainty ahead. Have you planned for the “what if”?  What if schools shut down again, what if the market slows down again, what if they run out of toilet paper again (lol)?

Seriously though, are you ready? Watch to see what I think you should focus on right now to ensure you’re ahead of this thing in case we go back into lockdown.  By David Greenspan. 

Bank of Canada drives another nail in the coffin for savers

Growing your retirement nest-egg safely became even more elusive this week after the Bank of Canada reiterated its pledge to keep its trend-setting interest rate near zero for years to come.

For borrowers it’s a reprieve, but for savers looking for a safe haven in fixed income it’s the continuation of more than a decade of paltry yields.

Bank of Canada Governor Tiff Macklem held Canada’s benchmark rate at 0.25 per cent until the country’s COVID-battered economy can sustain an annual growth rate of two per cent. In the meantime, safe fixed income investments such as guaranteed investment certificates (GICs) will trickle out annual returns of about one per cent.

It presents a real dilemma for Canadians saving for retirement through registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), and workplace defined-contribution (DC) pension plans. A typical retirement plan calls for portfolio growth of between five per cent and eight per cent. Much of the heavy lifting is done through equity investments linked to the stock market, and that risk is offset by a significant portion of fixed income.   

Lower fixed income yields will continue to force investors to generate income by putting a greater proportion of their retirement savings into riskier equity investments such as stocks that pay dividends. Unlike fixed income, dividends are paid at the discretion of the company and the underlying stock is subject to price changes at the discretion of the market. With the threat of a second wave of COVID-19 and a turbulent U.S. presidential election campaign, equity markets could be in for a wild ride.

That could cause even more grief for older investors in, or nearing, retirement who need to draw on a reliable source of cash for day-to-day living expenses. If cash and fixed income reserves dry up, they could be forced to sell equities in a down market, leaving less money invested to grow over time and see them through retirement.

Longer term government and corporate bonds can pay out a bit more but many bond experts say the extra yield is not worth the added risk of default, and having your money exposed to the market for long periods of time.

One questionable fixed income option is bond funds. Many investment advisors substitute them for the fixed income portion of a portfolio but returns are not consistent. That’s because holdings are often traded before maturity, and the funds themselves are subject price changes. In other words: income is not fixed. In many cases, advisors only have access to mutual funds, which pay them a commission.

Good advisors say fixed income should always have a place in a diversified portfolio regardless of yield. Even at zero, fixed income could be your best performing asset class if equity markets are down. The portion of a portfolio that should be dedicated to fixed income depends on the comfort level of the individual investor but should increase as they get older and closer to the time when they want to withdraw funds.

They say the best way to squeeze out the highest yields over the long term is to ladder maturities over different time intervals. The goal is to have fixed income maturities come often so there are more opportunities to get the best yields.

Deciding to sacrifice returns for security is a gut-wrenching reality in today’s economy. You might not reach your return goals, but at least you can rest easy knowing that something will be there.

Payback Time is a weekly column by personal finance columnist Dale Jackson about how to prepare your finances for retirement. Have a question you want answered? Email dalejackson.paybacktime@gmail.com.  By Dale Jackson. BNN Bloomberg.

Builders record busiest month for home construction in 13 years

Canadian housing starts, led by a blazing construction pace in Ontario, accelerated to the highest level seen in 13 years in August.

On a national level, starts reached 262,400 annualized units in August, up seven percent from July’s reading for the fastest pace of home building seen since 2007.

Housing starts measure how many homes began construction during a given period and are viewed as a key factor in determining market health.

The housing starts data, released earlier this week by the Canada Mortgage and Housing Corporation (CMHC), was hailed as another sign the housing market is in the midst of a robust recovery.

“Add this report to the list of very strong Canadian housing data that we’ve seen since the worst of the pandemic in April, as the sector continues to outperform other parts of the economy,” wrote TD Economist Rishi Sondhi.

“The robust pace of homebuilding is being driven by past sales gains, with low interest rates also providing support. These factors should keep homebuilding elevated through next year as well,” he continued.

Condo developers in Ontario were responsible for a substantial amount of the home construction strength seen on the national level, with starts in the province jumping by 30,700 units in August to 114,800 annualized units. Sondhi said it marked the strongest pace of home building in the province since 1990.

Looking ahead, market experts believe the blazing pace of home construction will likely run into the realities of the ongoing pandemic, with population growth temporarily slowing and government income support programs winding down, resulting in dampened demand for housing.

Sondhi noted that building permits, a reliable indicator of where home construction is heading, eased up in July, pointing to a come down from the dizzying pace seen in August.  By Sean MacKay. 

Stress test must be revised to reflect market realities – economist

Improved purchasing power will stem from the mortgage stress test being updated to reflect the sub-2% rates currently available in the market, according to economist Will Dunning.

The disparity is particularly jarring when one considers that new borrowers are tested against an interest rate of 4.79%, Dunning said in an interview with the Georgia Straight.

“This is an impediment to many Canadians achieving their reasonable home-buying goals and is also an impediment to the broader economic recovery,” Dunning said.

Moreover, the stress test does not take into account rising incomes, which Dunning said has been a decades-long trend.

“It is omitting one of the most important factors that will affect people’s ability to make their future payment, and so that’s a major flaw in the testing system that exists today,” Dunning said.

The economist added that while it’s “very good policy” to put borrowers through these assessments to ensure that they can actually pay their loans, some adjustments might be appropriate at this point.

“It’s time to recalibrate that policy to say, you know, what is a reasonable expectation about the conditions that will exist in five years and will affect people’s ability to make their payments,” Dunning said. “If you think interest rates might rise by two points over the next five years, and you also have an expectation that incomes will continue to rise the way they have in the past, then the way to simulate that combination is to say that the test should be the contracted interest rate plus three-quarters of a point.”  By Ephraim Vecina. 

Second homes and the principal residence tax exemption

From what I have read, the demand for cottage properties has soared during COVID-19. City folk are eager to get out of the city for a change of scenery, especially since many people are still working from home. So the idea of having your laptop set up on the dock of your second home is definitely appealing. And if you are on the selling side, you likely have benefitted from the high demand for properties.

A question I get from both purchasers and sellers is whether the principal residence exemption can be used to shelter the capital gain on a cottage property. The short answer is yes, it’s possible.

In order to take advantage of the principal residence exemption (PRE), certain requirements must be met:

  • You, your spouse or former spouse or a child must ordinarily occupy the house for some time during the year. Ordinarily occupy can also include a vacation home that is used by you and your family.
  • To claim the PRE on a large lot (over half a hectare – about 1 1/2 acres), you must be in a position to establish that the land over half a hectare is necessary for the “use and enjoyment” of your home. This may be quite relevant if your cottage or second home is located on a large piece of land or island.
  • Restrictions will also apply if part, or your entire home, is rented out or is not used by a family member, or if you have not been resident in Canada throughout the period of ownership (other than in the year of purchase).
  • As a general rule, a family can claim the PRE on only one home at a time. So the second home is more of a problem: to stop you from trying to claim a separate exemption for another home by putting it in the name of a child, children are restricted from claiming the exemption unless they have reached age 18 in the year or are married.
  • Where specific conditions are met, non-Canadian properties may also qualify for the PRE.
  • Subject to new rules that were introduced in 2016, it may be possible for certain trusts to claim the PRE provided that a corporation is not a beneficiary, and the trust designates a beneficiary (or their spouse, common-law partner or child) of the trust who ordinarily inhabits the property (referred to as a “specified beneficiary”). See further discussion below regarding trusts.

How it works

Most people think of the PRE as a black-and-white matter – either you qualify to sell tax-free or you don’t. Actually, this is not the case. When you sell your home, you must calculate the gain on your residence just like any other capital gain. Then PRE itself reduces your gain.

Moreover, eligibility for the exemption is on a year-by-year basis, which might come as a surprise to you. The more years you qualify relative to your total period of ownership, the more your gain gets reduced. The basic formula that normally applies:

1 + number of years after 1971 the house was used and designated as a principal residence (and you were a resident of Canada), divided by the number of years of ownership calculated after 1971, times the capital gain otherwise calculated.

Despite only allowing one property to be claimed, the rules allow you to have two residences in the same year: that is, where one residence is sold and another is purchased in the same year. That is why the above formula adds “1” to the number of years the property was a principal residence (the “plus one rule”). Note: As a result of certain changes to the rules that were announced in 2016 the “plus one rule” will not apply where an individual is not resident in Canada during that year. Prior to the change in rules, you could benefit from the PRE for the year that you purchased a residence in Canada, even though you were not a Canadian resident in the year of acquisition.

As you can see from the formula, to get the tax reduction you must designate the home as principal residence on a year-by-year basis.

Ownership by a trust:

Starting as of 2017, additional requirements will be applicable where a trust owns a principal residence (for the years that begin after 2016). Essentially, only the following types of trusts are able to designate a principal residence (where the trust has Canadian-resident beneficiaries and a “specified beneficiary”):

  • An alter ego trust, a spousal or common-law partner trust, a joint spousal or common-law partner trust (or a similar trust for the exclusive benefit of the settlor of the trust during his/her lifetime).
  • A testamentary trust created under a will that is a qualifying disability trust; or
  • A trust for the benefit of a minor child of deceased parents.

If you have a trust that owns a principal residence and don’t meet the above conditions, you can take advantage of transitional rules that will allow the trust to crystallize the PRE in respect of any accrued capital gain relating to the property up to Dec. 31, 2016. Essentially, the trust will be deemed to have disposed of the property on Dec. 31, 2016 (and the trust can shelter the gain under the PRE up until that date) and to have reacquired the property at a cost equal to the fair market value on Jan. 1, 2017.

However, it would appear that as long as the trust distributes the property to a specified beneficiary prior to an eventual sale, and the specified beneficiary in turn sells the property, the PRE would be available for those years after 2017 as well. That is because the trust would not be claiming the PRE; rather, the specified beneficiary does. So if you have purchased a cottage, and you happen to have children that are over the age of 18 (who don’t own their own home), it is still possible to make use of a discretionary trust to hold the cottage property for some time (with your adult children as beneficiaries) and then eventually distribute the property to your children. When the children eventually sell, they may choose to designate the cottage property as their principal residence for those years that they did not own another home. This results in tax savings, since if you held the cottage personally, you would have to pay capital gains tax on either the cottage or your home.

If your entire gain is covered by the PRE, you are now required to report the sale of your principal residence and make the designation (this was not the case prior to 2016). If you fail to do so, the CRA will accept a late principal residence exception in certain circumstances, but you could be subject to a penalty of up to $8,000.

Moreover, the CRA has the ability to reassess you beyond the normal reassessment period (three years from the date of the notice of assessment) if you do not report the disposition of your principal residence.

So whether you are preparing to find your perfect second home, or have just sold one, consider whether you and your family members might be able to take advantage of the PRE rules.  By Samantha Prasad.  

Economic Highlights

Assessing the economy six months into the pandemic

While lockdowns have been eased, the outlook remains uncertain

In this month’s letter, we examine the impact of the pandemic on the Canadian economy as the magnitude of the initial shock is now measurable.

We also share our expectations for the next six months. The economy still faces multiple challenges and a vaccine for the coronavirus will be necessary, but not sufficient, for a full recovery.

The economic impact—six months after the great lockdown

In the face of the unknown, the early months of the pandemic were marked by sweeping restrictions aimed at limiting the spread of the virus.

The economic impact of these measures was immediate. One in six Canadians lost their jobs between February and April (three million jobs lost). City centres around the world were emptied, industrial production slowed sharply and retail sales fell to an unprecedented low.

The most recent data from Statistics Canada shows the magnitude of the economic shock. In the first half of the year, the economy contracted by 13.4% compared to the fourth quarter of 2019.

However, since May, activity has picked up again and points to a rebound in GDP that would bring economic activity in September back to about 95% of its pre-crisis level. (See the Canada section.)

By August, 63% of the jobs lost during the lockdowns had been recovered. But not surprisingly, the most affected sectors remained accommodation and food services (21% fewer jobs) and information, culture and recreation (13%). These two industries depend on proximity to customers and an influx of tourists, who have been largely absent in 2020.

While the economy has performed mostly as expected, there have been some surprises. A V-shaped recovery—a rapid return to pre-crisis GDP—remains out of the question for the Canadian economy as a whole, but retail sales have exceeded expectations and even set a record in June.

These results are mainly attributable to the significant income support measures put in place by various levels of government, and consumers catching up on purchases that could not be made during the lockdowns.

Nevertheless, the economy remains in a severe recession with permanent job losses. Although it’s operating at close to 95% of its capacity, compared to 82% in April, the coming period is likely to be more difficult.

The expected scorecard for Year 1 of the COVID-19 era

In the absence of a second wave, the economy will continue to grow over the next six months, but at a much slower pace.

Despite increased confidence since the easing of the distancing measures, business investment intentions remain weak. According to our internal surveys, many entrepreneurs are focused on shoring up their finances as they emerge from the crisis. Investments will be delayed even longer in the hard-hit oil-producing provinces. (See oil section.)

Meanwhile, exports were down 8% in July compared to the pace observed in 2019. Several factors will continue to impact Canadian exporters, including low oil prices, uncertainty caused by tensions between the U.S. and China, and more generally, increased protectionism by several trading partners.

Finally, the gradual withdrawal of government support programs will have an impact on household disposable income, which has so far remained buoyant during the crisis.

Caution by consumers that’s reflected in a higher savings rate could lead to a slowdown in retail sales. In addition, physical distancing measures will limit the recovery potential of several sectors. It is unlikely that these measures will be further relaxed until a vaccine is developed and distributed. In the graph, the closer to 100, the more stringent are distancing measures. It shows that Canada’s current standing compares to the United States and is stricter than much of Europe.

Currently, we are forecasting a contraction of the Canadian economy of about 7% in 2020. This implies that the momentum observed over the summer will fade this fall.

Underlying risks remain significant

The strength of the recovery will depend on how two key risks play out.

  • In the short term, will a second wave of infections occur?
  • In the medium term, will a vaccine be deployed and how effective will it be?

In the short term

Our baseline scenario assumes Canada will escape a second wave of infections. However, a severe second wave would lead to a W-shaped recovery, where the economy would contract again in a few months’ time.

The reintroduction of lockdowns as stringent as the ones in effect last spring remains unlikely. However, a tightening of physical distancing measures would lead to further setbacks in several sectors, as demonstrated by the situation in some U.S. states.

A mushrooming number of cases is currently being reported in several European countries, including France and Spain. Thus, a partial lockdown remains a definite downside risk for Canadian entrepreneurs.

In the medium term

The full recovery of the global economy will require the development of a vaccine against COVID-19 that would likely be available in 2021. Several potential vaccines are currently in late-stage development.

However, there will still be many challenges to returning to a full-employment economy like the one we had before the pandemic began.

A vaccine is never 100% effective and the longevity of the immunity period would remain uncertain. Additionally, the production and distribution of a vaccine will be an unprecedented operation, suggesting it may run up against numerous bottlenecks.

Thus, a vaccine is necessary but not sufficient for an economic recovery. It is therefore likely the economic impact of COVID-19 will persist for some time to come. As things stand, outbreaks of infection could be part of our reality until 2022.

What does it mean for entrepreneurs?

1. The recovery is progressing well and the number of cases of infection remains stable for the moment.

2. However, the increase in infections in Europe shows the fragility of the situation. Canada could experience a second wave in the coming months.

3. Lockdowns as stringent as those in the spring are unlikely.  However, business owners operating in service sectors with close physical proximity (e.g. accommodation and food services) should have a contingency plan to deal with the possibility of a tightening of measures to counter the spread of the virus.

4. The development of a vaccine will not be enough to erase the economic damage done by COVID-19.  Entrepreneurs need to keep an eye on their cash flow.

5. According to our surveys, many companies have bet on a strategy of minimizing costs and increasing efficiency.  With the economy still nearly two years away from full recovery, it may be useful to follow their lead by reviewing your business processes to remain competitive.

Bank of Canada’s willingness to speak up will offend some, but it’s time to open policy debates

Tiff Macklem has been Bank of Canada governor for only four months, but he must be feeling comfortable, because he is making a habit of entering dangerous territory.

Macklem’s latest speech was about income inequality, a societal problem that economic orthodoxy suggests should be off limits for a central banker since there’s little that monetary policy can do to correct it. Mark Carney, a previous Bank of Canada governor, once offended some for expressing sympathy for the Occupy movement, which made a cause of trying to claw back the outsized wealth of the one per cent.

But economic orthodoxy was cracked by the Great Recession, and is now being shattered by the coronavirus pandemic.

Macklem started his professional career at the Bank of Canada in the 1980s, fought the 2008-09 financial crisis as a senior official at the Finance Department, and then had a chance to reflect on all that he had observed when he became dean of the University of Toronto’s Rotman School of Management. No governor has been more prepared for extraordinary events, and Macklem appears set to lead the central bank in a new direction.

Last month, Macklem signalled an end to the Bank’s tradition of aloofness, using a virtual appearance at the annual Jackson Hole central banking conference to argue that central banks had made a mistake by relying on traders, economists and journalists to interpret monetary policy for the masses. “The best way to get our messages to the public is to deliver them ourselves,” he said on Aug. 27.

Macklem on Sept. 10 backed that up in remarks given at a virtual event hosted by the Canadian Chamber of Commerce, yet clearly directed to a far broader audience than the business community. He used the bulk of his speech to share an analysis of how the COVID-19 recession has taken a disproportionate toll on women and younger workers, pledging to take that into account when assessing the state of the economy.

“Our mandate is to maximize the economic well-being of Canadians,” Macklem said. “Very uneven recessions tend to be longer and have a larger impact on the labour market. So, uneven outcomes for some can lead to poorer outcomes for all.”

Most people will find those comments reassuring, others will simply see them as a statement of the obvious. But some will deem them controversial, since certain political parties have made a virtue of closing the income gap, and convention suggests the central bank governor should speak only about arcana such as the output gap and the neutral rate of interest.

Those people will be doubly displeased by Macklem’s assertion during the question-and-answer period that “we are going to need to accelerate our efforts” on dealing with climate change, a fact-based statement that nonetheless will be construed by some as political.

However, it’s 2020 and central bankers are learning how to live with the fame that was thrust upon them during the financial crisis, when they arrested the Great Recession with relatively little help from elected officials.

There have been missteps, to be sure. Carney, who also served as head of the Bank of England, and Raghuram Rajan, the former Reserve Bank of India governor, often strayed too far from monetary policy in their public remarks, making themselves partisan targets. Rajan, while celebrated in the Indian press, was effectively run out of his home country by the ruling political party. Carney allowed himself to become a lightning rod in the Brexit debate.

Yet central bankers would be doing the public a disservice if they retreated entirely, because voters would lose access to an important perspective. Macklem appears willing to speak frankly on important economic issues, while steering clear of offering prescriptive advice on what legislators should do about them. “Striving for equality of opportunity is simply the right thing to do,” he said in his speech to the Chamber of Commerce.

Such an approach will invite slings and arrows.

You could argue that it’s a bit rich for a central bank to express concern about economic disparity, since monetary policy over the past decade probably made things worse. The most obvious beneficiaries of quantitative easing (QE), the policy of creating billions of dollars to buy bonds, have been equity investors, an already wealthy minority. Macklem acknowledged that possibility in his speech, while pointing out there is also research that suggests the opposite.

“Lower borrowing costs stimulate economic activity, which in turn boosts jobs and incomes, particularly for people with lower incomes,” he said. “Research on this topic is ongoing both internationally and here in Canada. We will continue to study and monitor all the effects of QE.”

Macklem was also fuzzy on how the Bank of Canada’s observations about the unbalanced nature of the COVID-19 recession would factor in policy going forward.

Before the pandemic, Jerome Powell, chair of the U.S. Federal Reserve, often boasted that the Fed’s decision to let the U.S. economy run past conventional limits associated with full employment resulted in more jobs for underprivileged groups without creating inflation. It seems likely the Bank of Canada will attempt to do the same, although Macklem declined to commit to that explicitly.

“It’s very important that we understand the dynamics of this recession,” he said on a conference call with reporters. “The unevenness affects the durability of the recovery and while we can’t target specific sectors or workers, the amount of stimulus we put in place will be calibrated to support the recovery, to support the durability of the recovery. That is how you get inflation back to target and keep it there.”

There will be chatter that Macklem’s Bank of Canada is letting itself get distracted by the latest fad in economics. So be it. At least the debate will be had out in the open.  By Carmichael Kevin. 

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Mortgage Interest Rates

Both Fixed  and Variable mortgage rates have decreased slightly and are at historically low levels.    View rates Here – and be sure to contact us for a quote to help you find the lowest rate for your specific needs and product requirements.

The Bank of Canada’s kept it’s overnight rate is 0.25%.  Prime lending rate remains at 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers.  The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval is 4.94%. 

The Bank of Canada’s target overnight rate is 0.25%.  Prime lending rate is 2.45%.  What is Prime lending rate?  The prime rate is the interest rate that commercial banks charge their most creditworthy corporate customers. The Bank of Canada overnight lending rate serves as the basis for the prime rate, and prime serves as the starting point for most other interest rates.  Bank of Canada Benchmark Qualifying rate for mortgage approval is 4.79%.   Read the Government of Canada Department of Finance summary on Benchmark Rate for Insured Mortgages statement here. 

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Your Mortgage

To ensure you obtain the best deals and lowest rates for your mortgage in a rapidly changing market, please contact us to discuss your needs, review your options and secure the lowest rates to protect your best interest.

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

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

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

Middlesex Health Unit


Southwestern Public Health


Ontario Ministry of Health


Public Health Canada


Factual Statistics Coronavirus COVID-19 Globally:





9 Apr



Posted by: Adriaan Driessen

Industry & Market Highlights 
Update on Ontario Essential Businesses

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

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

Check out the full news release for more details.

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

March home sales remain steady

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

April will likely be a different story, Campbell said.

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

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

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

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

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

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

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

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

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

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

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

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

Canadian housing market recovery may begin by early summer: RBC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

However, there are exploitive outliers.

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

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

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

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

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

Economic Highlights
Canada Loses Over a Million Jobs in March

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Residential Market Commentary – March limps away

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Government Responses

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

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

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

Mortgage Deferrals

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

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

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

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

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

Purchasing power to further weaken as small businesses fold

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

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

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

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

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

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

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

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

Mortgage Interest Rates

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

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

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

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

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

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

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

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

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


Your Mortgage

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

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

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

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

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

Middlesex Health Unit


Southwestern Public Health


Ontario Ministry of Health


Public Health Canada


Factual Statistics Coronavirus COVID-19 Globally:



8 Apr



Posted by: Adriaan Driessen

That is the question.

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

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

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

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

Deferred payments are only recommend to avoid default.

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

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


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

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

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

Thanks for your time and keep well!

2 Apr



Posted by: Adriaan Driessen

Industry & Market Highlights 

Bank of Canada enacts another overnight rate cut

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Ontario Prohibits Gatherings of More Than Five People with Strict Exceptions

Stronger action required to stop the spread of COVID-19

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

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

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

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

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

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

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

Quick Facts

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

Additional Resources


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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economic Highlights

Bank of Canada Moves to Restore “Financial Market Functionality”

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

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

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

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

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

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

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

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

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

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

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

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

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

The Stock Market Has Had Three Good Days

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

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

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

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

Millions of Canadians already missing payments due to COVID-19

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

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

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

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

Getting help

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

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

Mortgage Update - Mortgage Broker London

Mortgage Update – Mortgage Broker London

Mortgage Interest Rates

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

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

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

Why Are Mortgage Rates Rising?

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

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

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

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

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

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

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

So Why Are Mortgage Rates For New Loans Rising?

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

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

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

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

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

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

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

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

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

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

Your Mortgage

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

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

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

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

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

Middlesex Health Unit


Ontario Health


Government Canada Public Health


World Health Organization: 


Factual Statistics Coronavirus COVID-19 Global Cases




25 Mar


Latest News

Posted by: Adriaan Driessen


Many people, including myself, are feeling concerned about the health crisis and financial crisis that is slowly developing in front of our own eyes.  We are experiencing a time of uncertainty, unknown territory, economic & market volatility and financial liquidity/solvency concerns.

This is why I decided to put together a Canadian HomeOwners Guide to the Health Crisis & Financial Crisis triggered by the COVID-19 Pandemic based on some great information found online.

As your broker, I carefully watch markets and the economy as it relates and integrates into real estate, mortgage financing and general finances, and we use data and information received form analysts, economists and other specific industry professionals that interrelates, in order to be able to better guide, counsel and advise our clients.  We also seek out important and helpful sources of other information that we can share with our clients.

I have found some great resources from PeakProsperity.com that we are implementing ourselves, and that I am sharing with others as I know this will benefit you immensely.

Peak Prosperity The Coronavirus Home Lockdown Survival Guide: How To Stay Healthy, Sane & Solvent.  Watch the video presentation here:


In summary: We do not know how long the coming mandatory lock-down quarantine period will last; it could be weeks, it could be months.

Stock your home for success, stay physically healthy, stay emotionally health, stay financially solvent.  This too shall pass.

Here are the recommendations – a Canadian HomeOwners Guide to the Health Crisis & Financial Crisis triggered by the COVID-19 Pandemic:

  • Stock a deep pantry, have sufficient food supplies. 
  • Use PPE (personal protection equipment) if you need to go out.
  • Sufficient cleaning supplies to keep your home clean.
  • Medicine and supplements and first aid supplies.
  • Emergency preparedness eg. power outage, water etc.
  • Reduce your non essential expenses.
  • If you have emergency finances put away, now is the time to release it and have it available.  If you have some investments that you can liquidate, contact your financial advisor to assist you to release funds.  Hopefully your financial advisor had you prepare for times like this in advance.
  • If you are a homeowner and you do not have 6 months worth of living expense finances put away, consult with your mortgage broker for options and potential of equity take out if sufficient equity is available in your property.  
  • If you are a homeowner and you experience income loss and are at risk of default, contact your current bank/lender customer service departments to see what options they have available for relief on mortgage payments to avoid default.  You can also contact your mortgage broker for other solutions to avoid default and foreclosure to prevent loosing your home.
  • If you are a tenant/renter, contact your landlord to see what options they have available for relief on rent payments to avoid default.  Also contact the Landlord & Tenant Board to review options to protect tenants during the COVID-19 pandemic. http://www.sjto.gov.on.ca/ltb/
  • Review the Government of Canada Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses to see what benefits and options are available to you.   https://www.canada.ca/en/department-finance/news/2020/03/canadas-covid-19-economic-response-plan-support-for-canadians-and-businesses.html
  • Alternatively get access to low-cost unsecured credit like a line of credit from your bank or credit union, or as a last resort high interest credit cards though only a last resort recommendation.
  • Free up some cash by selling articles that are not used and/or not needed in the local market place using Kijiji or social media local marketplaces while you still can.
  • Eat healthy food.
  • Take your vitamin supplements, especially vitamin C&D to boost your immunity.
  • Regular exercise.
  • Sufficient sleep.
  • Get sunshine & fresh air.
  • Mind your mental & emotional health.  Stimulate your mind.  Read, learn, set goals, positive thinking, journal. Practice thankfulness in all circumstances.  Set up constructive activities.  Create routines. Stay connected with friends virtually.  Speak to someome if you need help – Mental health helpline ConnexOntario 866-531-2600. https://www.connexontario.ca/treatment-information-service-call
  • Mind your relationships.  Avoid resentment and criticism.  Practise respect, patience, consideration, grace, mindfulness, kindness. 
  • If you feel ill with mild flu symptoms, isolate and self medicate.  Stay hydrated and well nourished, and rest.  Regulate low grade fever with Tylenol. Should you develop respiratory distress, that is the time to go to hospital and seek medical help.  If uncertain, contact Telehealth Ontario for fast, free medical advice Toll-free: 1-866-797-0000.  Do not go to the Hospital unless you have to. 
  • Stay informed and updated. Visit my Blog with regular updates on the economy and markets as the COVID-19 pandemic develops and evolves over time.  http://imortgagebroker.ca/blog/

We are living in very interesting times.  Remember that there have been way worse events in world history.  Let’s be thankful we live in a free country, with free healthcare (albeit high taxes to pay for that), where neighbours still care for neighbours, where our government though falling very short, is still a democracy and not communist.  Reminder of the words spoken by President  Franklin D. Roosevelt. ”The Only Thing We Have to Fear is Fear Itself”.

One last thought:  Fear is used to manipulate us. If you have one last fear, the fear over death, please reach out to me.  There is a great HOPE that overcomes death.

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
6 Mar


Latest News

Posted by: Adriaan Driessen

Industry & Market Highlights 

Bank of Canada lowers overnight rate at second 2020 meeting

The Bank of Canada lowered its target for the overnight rate by 50 basis points to 1.25 percent from 1.75 percent.

This is the first time the benchmark rate has changed since October 24, 2018.

Comparing the Bank’s two most recent statements (today and January 22, 2020), we find several notable new comments:

  • It is “becoming clear that the first quarter of 2020 will be weaker than the Bank had expected” when CPI inflation was “stronger than expected”
  • While Canada’s economy has been operating close to potential with inflation on target, “the COVID-19 virus is a material negative shock to the Canadian and global outlooks”
  • COVID-19 “represents a significant health threat to people in a growing number of countries” and in some regions, business activity has fallen sharply, supply chains have been disrupted, commodity prices have been pulled down and the Canadian dollar has depreciated
  • The drop in Canada’s terms of trade, if sustained, will weigh on income growth
  • Business investment “does not appear to be recovering as was expected following positive trade policy developments”
  • Although markets continue to “function well,” the Bank of Canada will continue to ensure that the Canadian financial system has sufficient liquidity

As a result of its revised near-term outlook, the Bank’s Governing Council noted that it “stands ready” to adjust monetary policy further if required to support economic growth and keep inflation on target.

BoC’s next policy announcement is set for April 15, 2020 and in the ensuing period the Bank’s Governing Council intends to coordinate with other G7 central banks and fiscal authorities as it “closely” monitors economic and financial conditions. We will closely monitor these conditions as well.  By First National Financial. 

Ontario passes Trust in Real Estate Services Act

The Ontario Government has passed the Trust in Real Estate Service Act, 2019 (TRESA), and was announced at the Ontario Real Estate Association’s REALiTY Conference and AGM by new OREA President Sean Morrison.

The legislation was called back on Wednesday, and the Bill was unanimously passed after its third and final reading. TRESA amends the Real Estate & Business Brokers Act, 2002 (REBBA).

“This is a huge win for our Realtor members, their clients and hardworking Ontarians across the province,” said OREA President Sean Morrison. “Thanks to the Ford Government’s newly passed legislation, Ontario’s homebuyers and sellers can have greater confidence that the Realtor at their side during the largest financial transaction of their life has the highest professional standards, training and modern tools in North America, such as the ability to form personal real estate corporations.”

TRESA is one of the few pieces of legislation in Ontario to receive bi-partisan support following constructive debate in the Legislature led by Minister Lisa Thompson and NDP Consumer Critic Tom Rakocevic and other MPPs.

“By strengthening consumer protection and fixing the broken real estate discipline system, the Government of Ontario is showing Realtors and home buyers and sellers that it is on their side,” said OREA CEO Tim Hudak. “Ontarians deserve the best when it comes to making the biggest financial transaction of their lives and TRESA will make this province the North American leader once again when it comes to a well-regulated real estate market.”

OREA has been advocating for a review of REBBA for over a decade and finally, the Ontario Government has passed this historic piece of legislation.

There are five primary goals in the proposed legislation: enable regulatory changes that would improve consumer protection and choice; improve professionalism among real estate professionals and brokerages through enhanced ethical requirements; update the powers available to RECO to address poor conduct and improve efficiency; create a stronger business environment; and bring legislation and regulations up-to-date and reduce regulatory burden.

Ontario’s real estate rules were nearly 20 years old and this legislation brings the profession into the modern age, Hudak indicated.

OREA will continue to work closely with the Government of Ontario as they develop regulations for the Bill, and work towards enacting the legislation into law.  By Kimberly Greene. 

Changes to stress test

Minister of Finance Bill Morneau announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages.

Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. These changes will come into effect on April 6, 2020.

The new benchmark rate will be published on a Wednesday and come into effect the following Monday.

“For many middle-class Canadians, their home is the most important investment they will make in their lifetime. Our government has a responsibility to ensure that investment is protected and to support a stable housing market. The government will continue to monitor the housing market and make changes as appropriate. Reviewing the stress test ensures it is responsive to market conditions,” Morneau said.

The minimum qualifying rate for insured mortgages will now be the greater of the borrower’s contract rate, which is the mortgage interest rate agreed to by the lending institution and the borrower; or the new benchmark rate.

The change comes after a recent review by federal financial agencies, which concluded that the minimum qualifying rate should be more dynamic to better reflect the evolution of market conditions. Overall, the review concluded that mortgage standards are working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses. This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions.

The new Benchmark Rate for insured mortgages will be published weekly on the Bank of Canada’s website, and will be based on submitted mortgage insurance application contract rates. If, on any given week, there are any delays in updating the new Benchmark Rate, the previous week’s published Rate will stand until a new Rate is published.  By Kimberly Greene. 

Who are the winners with the new qualifying interest rate?

Mortgage brokers and homebuyers across Canada got the relief that many of them have been clamouring for: a change in the qualifying interest rate for insured mortgages.

Last week, Minister of Finance Bill Morneau announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages. As of April 6th, that rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.

“It’s fantastic news. Borrowers will now have a little more buying power,” said Michelle Campbell, principal mortgage broker at Mortgage District. “It’s definitely a step in the right direction.”

Others, however, are a little slower to rejoice.

“At this time it is too hard to tell – with no idea what the new benchmark rate is going to be, we don’t know if it is just a 10bps or 25bps difference. That difference might increase a borrower’s purchasing power a little but at the same time we will see a potential upswing in increases in prices for the Spring market as well as the perception that the market is hot—which could potentially just mitigate or counteract any potential this change might provide,” said Claire Drage, CEO of the Windrose Group.

The so-called stress test was put into place at a time where the interest rate environment was thought to be rising, and it did effectively put the brakes on the runaway housing markets of Toronto and Vancouver. Given that prices had begun to rise again in Toronto, however, some people question whether or not this is the right time to change it—and whether or not a more regional-specific strategy would had a better effect nationwide.

In fact, Royal LePage President and CEO Phil Soper recently reiterated this point a few weeks ago, calling for housing policy that meeds the varied economies and needs that vary region to region.

Mixed benefits have also been shared by industry analysts.

“Changes are likely to further increase home prices, further stretching affordability and consumer leverage,” RBC Capital Markets analyst Geoffrey Kwan told Bloomberg. “The changes are aimed at the demand side of the equation regarding home ownership, instead of addressing the supply side.”

But buyers aside—it could be that the entities that stand to benefit the most from this change are the companies with the highest gearing to the mortgage market (i.e., Equitable Group, Home Capital, Genworth MI, and First National) as opposed to companies that are more diversified, such as the big banks and regional lenders.

National Bank Financial Analyst Jaeme Gloyn told Bloomberg that the lower qualifying rate should shift part of the mortgage away from private, unregulated lenders back into the regulated mortgage market. Borrowers at least have a choice to get a larger mortgage or at least qualify for one, both of which stimulate the housing market and benefit lenders.

“In the short run, this change will likely help some Canadians who currently do not qualify for mortgage financing get into the housing market,” Cormark Securities Inc. Analyst Meny Grauman told Bloomberg. “However, over time this change is likely to only raise prices given increased marginal demand.”

The move could be a risky one, as household debt continues to rise. In a note to investors, Bank of Montreal economists said that “to the extent the rule change fans some already-hot regions, it might discourage the Bank of Canada from lowering rates.”

The Office of the Superintendent of Financial Institutions (OSFI) said it’s considering a similar change for uninsured mortgages and is seeking input before March 17.  By Kimberly Greene. 

London area home sales remain at peak levels

Last month, local residential real estate transactions remained at peak levels, with 740 homes trading hands in LSTAR’s jurisdiction – only 22 less than three years ago, when the Association had its best February sales ever.

“Overall, home sales took a leap over the previous month – from 568 to 740, which signals an early start of a busy spring market,” said 2020 LSTAR President Blair Campbell.

Compared to a year ago, the local residential sales activity saw a 23.7% increase, while the overall average home price experienced a 13% surge, rising to $445,535 in February.

“Even though the number of LSTAR new listings grew to 1,034, which is almost on par with the 10-year average, the number of active listings at month end was still much lower than normal. This reflects the strong demand for residential properties in our area,” stated Campbell.

Inventory is another important measure of the balance between sales and the supply of listings. This shows how long it would take to liquidate existing inventories at the current rate of sales activity. At the end of February 2020, there were only 1.8 months of inventory across the entire LSTAR district – the lowest level in the last ten years.

“Looking at the home sales activity in LSTAR’s five main regions, it’s interesting to see that three of them – Elgin County, Middlesex County and Strathroy – had their second best February ever. London witnessed its third best February with 488 home sales, while St. Thomas set a new absolute record for February home sales, with 68,” Campbell noted.

“However, if you will dig deeper into the London statistical figures, you will be surprised to discover that London South’s February home sales reached their highest peak ever. This demonstrates, once again, that real estate is local and that, if you’re looking for real estate information or guidance, a local REALTOR® is your best bet,” Campbell emphasized.

The following table illustrates last month’s average home prices in LSTAR’s main regions and how they compare to the values recorded at the end of February 2019.

“Analyzing average prices in London’s three main geographic areas, it is worth to note that London East saw the biggest year-over-year increase,” Campbell added.

The average home price in London East was $369,094, up 21.8% from last February, while London North saw an increase of only 6.1% over last February, with an average home sales price of $530,042. In London South, the average home price was $437,667 – up 11.5% over February 2019.

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

Toronto approves increase in residential property tax

In a move touted by local leadership as a vital component of a “good, responsible, realistic” budget, the Toronto city council has implemented a 4.24% residential property tax hike for 2020.

The new levy that came with the approval of the city’s $13.5-billion operating budget would mean an estimated $130 in additional expenses for each household this year.

“The budget is balanced in the sense that the revenues meet the expenditures as is required by law. But I believe it is also balanced in the context of balancing all the competing interests and different interests that the city has,” Mayor John Tory said in a news conference earlier this week, as quoted by CBC News.

“I understand that people, in many cases, are finding life stressful on a financial basis today, but together with a modest tax increase, we’re also doing things to try to make their lives more affordable,” Tory added. “It will cost a lot more in the future if we don’t invest in transit and affordable housing and community safety now.”

Housing taxes have been repeatedly put forward as solutions to a wide assortment of market ills, and this has become an especially contentious topic in the higher-end market.

Among the suggestions put forward by city officials is a 3% tax on homes with sales values of $3 million and higher. Councillor Ana Bailao (Ward 9 Davenport) has also called for a policy similar to that of Vancouver’s vacant homes tax – which earned the latter city around $40 million last year alone.

However, Don Kottick of Sotheby’s warned that such a move will only end up discouraging talent from other places.

“I don’t think taxing is the right way to go. We’re already paying more tax than people pay in other countries,” the Sotheby’s CEO told the Toronto Star. “If you keep taxing we’re going to become anti-competitive.”

“At some point people are going to say, ‘Enough is enough.’”  By Ephraim Vecina. 

Economic Highlights

Interest Rates Nosedive as Bank of Canada cuts rates 50 BPS

Following the surprise emergency 50 basis point (bp) rate cut by the Fed, the Bank of Canada followed suit and signalled it is poised to do more if necessary. The BoC lowered its target for the overnight rate by 50 bps to 1.25%, suggesting that “the COVID-19 virus is a material negative shock to the Canadian and global outlooks.” This is the first time the Bank has eased monetary policy in four years. 

According to the BoC’s press release, “COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply, and supply chains have been disrupted. This has pulled down commodity prices, and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.” The press release went on to promise that “as the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.” 

Moving the full 50 basis points is a powerful message from the Bank of Canada. Particularly given that Governor Poloz has long been bucking the tide of monetary easing by more than 30 central banks around the world, concerned about adding fuel to a red hot housing market, especially in Toronto. Other central banks will no doubt follow, although already-negative interest rates hamper the euro-area and Japan.

Canadian interest rates, which have been falling rapidly since mid-February, nosedived in response to the Bank’s announcement. The 5-year Government of Canada bond yield plunged to a mere 0.82% (see chart below), about half its level at the start of the year. 

Fixed-rate mortgage rates have fallen as well, although not as much as government bond yields. The prime rate, which has been stuck at 3.95% since October 2018 when the Bank of Canada last changed (hiked) its overnight rate, is going to fall, but not by the full 50 bps as the cost of funds for banks has risen with the surge in credit spreads. A cut in the prime rate will lower variable-rate mortgage rates. 

Many expect the Fed to cut rates again when it meets later this month at its regularly scheduled policy meeting, and the Canadian central bank is now expected to cut interest rates again in April. Of course, monetary easing does not address supply-chain disruptions or travel cancellations. Easing is meant to flood the system with liquidity and improve consumer and business confidence–just as happened in response to the financial crisis. Expect fiscal stimulus as well in the upcoming federal budget. 

All of this will boost housing demand even though reduced travel from China might crimp sales in Vancouver. A potential recession is not good for housing, but lower interest rates certainly fuel what was already a hot spring sales market. Data released today by the Toronto Real Estate Board show that Toronto home prices soared in February, and sales jumped despite low inventories. The number of transactions jumped 46% from February 2019, which was a 10-year sales low as the market struggled with tougher mortgage rules and higher interest rates. February sales were up by about 15% compared to January.

Virus Anxiety and The Canadian Housing Market

As though things weren’t volatile enough, a new wave of virus terror is wreaking havoc on global financial markets. The novel conronavirus, COVID-19, continues to spread causing panic in worldwide stock and bond markets for the seventh day. Share prices have plummetted in Asia, Europe, the U.S. and Canada. The sell-off is fueled mostly by concern that measures to contain the virus will hamper corporate profits and economic growth, and fears that the outbreak could get worse.

Interest rates are falling sharply, hitting record lows reflecting a movement of cash out of stocks and commodities like oil, into the safer havens of government bonds and gold. In Canada, the 5-year bond yield has fallen to 1.16% this morning, down more than 50 basis points (bps) year-to-date and down 65 bps year-over-year (see chart below). Mortgage rates are closely linked to the 5-year government bond yield, so further downward pressure on mortgage rates is likely. Oil prices have fallen sharply, hitting the Prairie provinces hard. Crude oil WTI prices have fallen to just over US$45.00 a barrel compared to $62.50 earlier this year.

The Canadian dollar has also taken a beating, down to 0.7468 cents US, compared to a high of 0.7712 early this year.

The Canadian economy was already battered as today’s release of fourth-quarter GDP data shows. Statistics Canada reported that the economy came to a near halt in Q4 as exports dropped by the most since 2017 and business investment declined. Household spending was a bright spot–a reflection of a strong labour market and rising wages.

Monthly data for December, also released this morning, came in stronger than expected, showing the economy had some momentum going into 2020 before the coronavirus reared its ugly head.

The weak 0.3% growth in Q4 was expected as a series of temporary factors including a week-long rail strike, manufacturing plant disruptions and pipeline shutdowns slowed growth. Even though December posted an uptick, the first quarter will no doubt be hampered by the rail blockade and now virus-related supply and travel disruptions as well as reduced tourism.

Bottom Line: Panic selling in the stock market is never a good idea. The TSX opened down more 550 points this morning following yesterday’s outage. Trading on Thursday was suspended around 2 PM for technical reasons. None of this is good for psychology or the economy.

The Bank of Canada meets next Wednesday, and clearly, their press release will address these issues. It’s unlikely the Bank will cut rates in response on March 4, but if the economic disruption continues, rate cuts could be coming by mid-year.

The new stress test will be in place on April 6. If rates were at today’s level, the qualifying rate for mortgage borrowers would be more than 40-to-50 basis points lower than today’s level of 5.19%. This will add fuel to an already hot housing market.

Mortgage Interest Rates

Prime lending has lowered 50 bps is 3.45%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is still at 5.19% but changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. 

Fixed rates are moving down with lower bond yields.  Deep discounts are offered by some lenders for variable rates making adjustable variable rate mortgages very attractive again.

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

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

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

22 Feb



Posted by: Adriaan Driessen

Industry & Market Highlights 

Minister Morneau Announces New Benchmark Rate for Qualifying For Insured Mortgages

The new qualifying rate will be the mortgage contract rate or a newly created benchmark very close to it plus 200 basis points, in either case. The News Release from the Department of Finance Canada states, “the Government of Canada has introduced measures to help more Canadians achieve their housing needs while also taking measured actions to contain risks in the housing market. A stable and healthy housing market is part of a strong economy, which is vital to building and supporting a strong middle class.”

These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.

This follows a recent review by federal financial agencies, which concluded that the minimum qualifying rate should be more dynamic to reflect the evolution of market conditions better. Overall, the review concluded that the mortgage stress test is working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses.

This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions.

The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages.

The existing qualification rule, which was introduced in 2016 for insured mortgages and in 2018 for uninsured mortgages, wasn’t responsive enough to the recent drop in lending interest rates — effectively making the stress test too tight. The earlier rule established the big-six bank posted rate plus 2 percentage points as the qualifying rate. Banks have increasingly held back from adjusting their posted rates when 5-year market yields moved downward. With rates falling sharply in recent weeks, especially since the coronavirus scare, the gap between posted and contract mortgage rates has widened even more than what was already evident in the past two years. 

This move, effective April 6, should reduce the qualifying rate by about 30 basis points if contract rates remain at roughly today’s levels. According to a Department of Finance official, “As of February 18, 2020, based on the weekly median 5-year fixed insured mortgage rate from insured mortgage applications received by the Canada Mortgage and Housing Corporation, the new benchmark rate would be roughly 4.89%.”  That’s 30 basis points less than today’s benchmark rate of 5.19%.

The Bank of Canada will calculate this new benchmark weekly, based on actual rates from mortgage insurance applications, as underwritten by Canada’s three default insurers.

OSFI confirmed today that it, too, is considering the new benchmark rate for its minimum stress test rate on uninsured mortgages (mortgages with at least 20% equity).

“The proposed new benchmark for uninsured mortgages is based on rates from mortgage applications submitted by a wide variety of lenders, which makes it more representative of both the broader market and fluctuations in actual contract rates,” OSFI said in its release.

“In addition to introducing a more accurate floor, OSFI’s proposal maintains cohesion between the benchmarks used to qualify both uninsured and insured mortgages.” (Thank goodness, as the last thing the mortgage market needs is more complexity.)

The new rules will certainly add to what was already likely to be a buoyant spring housing market. While it might boost buying power by just 3% (depending on what the new benchmark turns out to be on April 6), the psychological boost will be positive. Homebuyers—particularly first-time buyers—are already worried about affordability, given the double-digit gains of the last 12 months.  By Dr. Sherry Cooper.  Chief Economist, Dominion Lending Centres. 

OSFI considering new benchmark rate for uninsured mortgages

The Office of the Superintendent of Financial Institutions (OSFI) has announced that it is considering a new benchmark rate to determine the minimum qualifying rate for uninsured mortgages. OSFI is seeking input from interested stakeholders on this proposal before March 17, 2020.

OSFI’s mortgage underwriting guideline (B-20) sets the minimum qualifying rate for uninsured mortgages. Currently, the minimum qualifying rate is the higher of the contractual mortgage rate plus two percent, or the 5-year benchmark rate published by the Bank of Canada. The current benchmark rate is based on the posted rates from the six largest banks in Canada.

Earlier this year in remarks to the C.D. Howe Institute, OSFI indicated that it was reviewing the benchmark rate used for qualifying uninsured mortgages. OSFI has observed that the gap between actual contract rates and the current benchmark rate has widened, suggesting a less responsive floor than originally intended. The goal of the review is to identify a measure that is more accurate and responsive to market changes.

“Sound mortgage underwriting and B-20 contribute to financial stability throughout the economic cycle. Continually reviewing our prudential measures is part of an effective regulatory framework. This proposal aims to address the limitations of the current benchmark rate while preserving the integrity of the overall qualifying rate,” said Ben Gully, assistant superintendent, regulation.

OSFI is considering replacing the current benchmark rate with the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus a two percent buffer. This would be the same benchmark rate that’s going to be used for insured mortgages as of April 6th, as the Minister of Finance announced yesterday, following consultations with OSFI and other federal financial agencies.

OSFI’s proposed new benchmark for uninsured mortgages is based on rates from mortgage applications submitted by a wide variety of lenders, which makes it more representative of both the broader market and fluctuations in actual contract rates. In addition to introducing a more accurate floor, OSFI’s proposal maintains cohesion between the benchmarks used to qualify both uninsured and insured mortgages.

OSFI is seeking input from interested stakeholders on this proposal by email to b.20@osfi-bsif.gc.ca before March 17. OSFI will communicate final amendments to the benchmark rate for uninsured mortgages by April 1, with changes effective on April 6.  By Kimberly Greene.

Residential Market Commentary – Tight market to persist

Canada’s re-sale housing market got a little love in January according to statistics released by the Canadian Real Estate Association on Valentine’s Day.

Sales activity was up 11.5% compared to January 2019 and prices climbed by 11.2% from a year ago.  It was the best January for sales in 12 years, despite a 2.9% dip from December.

Winter is a notoriously tricky time to gauge the market.  Low volumes mean small anomalies or bad weather can have an outsized influence on the numbers.  But market watchers, including CREA, are shaking off the month-over-month decline and taking a closer look at other factors.

The number of new listings for January was virtually flat; up just 0.2% over December.  It’s a very small increase following several months of decline.  The sales-to-new-listings ratio is now 65.1%.  That is two full points lower than a year earlier, but it is significantly higher than the long-term average of 53.8%, and it has been for the past four months.  The national housing inventory is pegged at 4.2 months, a full month below the long-term average.

CREA and others expect market tightening to persist and translate into renewed price acceleration.  The MLS Home Price Index climbed 4.7% y-o-y in January.  Most markets saw increases – several in, or near, double digits – but the prairies and Newfoundland and Labrador are exceptions.

It is also expected that tight market conditions will persist, tilting the balance in favour of sellers.  Population growth, wage growth and low unemployment are all factors that promote increasing demand, while supply remains relatively low.  By First National Financial. 

No. 1 mortgage issue? The stress test

Will the federal government’s current review of the mortgage stress test (Guideline B-20) result in adjustments to the rules, allowing more consumers into the home buying market – particularly in cities and provinces where housing affordability is not a crisis?

Currently the stress test rules keep renters from buying homes in affordable provinces and cities, such as the prairie and Atlantic provinces and in Quebec, says Paul Taylor, CEO and president of Mortgage Professionals Canada. “They (residents) can find properties they can finance quite affordably but they can’t afford the fictitious rate . . . given the distance between the street rate and the stress test. . .”

Reducing the stress test rules could increase buyer activity, but if the federal government thinks a recession is coming – as a number of economists predict – then don’t count on them making significant stress test adjustments, Taylor says.

MPC has wanted a reduction in stress tests almost since the introduction in 2017. Mortgage insurance premiums are high and stress test qualifications are stringent, Taylor says, noting that individuals must also be “very well capitalized” under the minimum capital tests.

If the overnight rate is calculated at three per cent, which the government says is neutral, then the interest rate for most consumers would be 4.25 to 4.5 per cent for a five-year fixed term, he says. An interest rate at neutral or above neutral means the Bank of Canada is trying to suppress, not stimulate, activity, he says. Consumers should not face stress tests on top of a suppressive interest rate, “or we almost will be doubling down specifically on the real estate sector when trying to slow the economy.”

MPC’s recommendation is a floor of a qualifying rate of 4.5 per cent, he says. If the contract rate is lower, people should prove they can manage it; if higher, they should be able to qualify at the contract rate “because they are already paying a higher than usual interest rate . . .”

Taylor says MPC’s calculation for a stress test that is 75 basis points above contract – the equivalent of a two-per-cent interest rate hike after five years – has garnered little attention from the government. That number was arrived at partly through calculations of an increase in property equity over five years and an increase in owner’s earnings.

MPC also advocates exemptions to Guideline B-20 for mortgage renewals. Some borrowers successfully completing a five-year term can’t move their mortgage to a different lender with lower rates because they don’t qualify under the current stress test rules.

The government is aware that any changes to the insured market must be followed in the uninsured market to avoid “a dislocation in the way the market will work,” Taylor says, pointing out the government is expected to collaborate with all parties, including the Office of the Superintendent of Financial Institutions (OSFI), the Bank of Canada and Canada Mortgage and Housing Corp. on any changes to avoid the problem.

Banks have 75 per cent of market

In the CMHC Residential Mortgage Industry Dashboard released last fall, 75 per cent of outstanding mortgages were held by the banks and 0.23 per cent of those mortgages were delinquent. Taylor expects a “small percentage erosion” in the bank mortgages because of regulatory qualifications, while non-bank lenders could pick up that slack.

Credit unions and caisses populaires held 14 per cent of home mortgages, according to the CMHC report, and only had a delinquency rate of 0.16 per cent. While credit unions, (provincially regulated) are not required by law to adhere to the stress test, many boards have voted to voluntarily comply anyway, Taylor says. Meanwhile, credit union boards with laxer underwriting rules will still have to show prudence in managing depositors’ money.

The CMHC report indicates that mortgage finance companies held six per cent of the market, with a delinquency rate of 0.26 per cent rate. Mortgage investment corporations (MICs) and private lenders, meanwhile, held only one per cent of the market, with a delinquency rate of 1.92 per cent. But this sector is increasing at about 10 per cent a year versus only two per cent annual growth from other lender sectors, says Tania Bourassa-Ochoa, senior housing research specialist, CMHC.

Bourassa-Ochoa says most MICs concentrate in large metropolitan areas such as Toronto, Vancouver and Montreal.

While MICs have high interest rates, they are still “probably significantly lower” than rates negotiated with banks for unsecured lines, says Taylor. “They are performing a service that the marketplace really quite desperately needs . . . considering the contraction of credit availability of stress tests and such.”

30-year amortization

MPC advocates the reintroduction of an insurance-eligible 30-year amortization period for first-time buyers. Taylor says it would be more effective than the first-time homebuyers incentive plan in place now, which is a shared equity mortgage funded by the feds, he says.

Taylor notes that precluding people from taking on the debt of home mortgages doesn’t stop them from building other debt loads through credit cards, which have higher interest rates.

Bourassa-Ochoa says uninsured mortgages are growing faster than insured mortgages.

According to Equifax data, which covers about 80 per cent of outstanding mortgages, there are about 8.162 million mortgage holders in Canada, Bourassa-Ochoa says.

Taylor says the MPC agrees with many policy points in federal housing and CMHC strategies. Increasing purpose-built rental in hot markets such as Toronto and Vancouver will take the pressure off condominium markets to address rental demand. Purpose-built rental will also provide more security of tenancy than condominium rentals does.  “It could start to ease (condo) pricing because there is lower investor demand. . .”

The MPC also supports as-of-right zoning around transit hubs such as subway stations to prevent local residents from vetoing increased densification or nodal developments. While at times property owners have legitimate concerns about developments negatively affecting their property values, NIMBYism can have a negative effect on healthy growth in cities like Toronto and Vancouver that need more affordable housing, he says.  By Don Procter.  

Nearly half of Canadian millennials despondent about home ownership

Almost half of Canadian millennials admitted that they are disillusioned by their financial situation, with the disenchantment largely driven by rising home prices, mounting personal debt, and stagnant salaries, according to a new poll by KPMG.

The global accountancy firm found that while 72% of those surveyed are aiming for home ownership, fully 46% of the respondents indicated a belief that their chances of owning a home are nothing more than flights of fancy.

Moreover, 46% of those who do own homes had to depend on parental finances to fulfill their down payment requirements.

“The combination of rising house prices, high levels of personal debt, and annual incomes that are just a fraction of the cost of buying a home compared with their parents’ generation, is pushing the dream of home ownership out of reach for many millennials,” KPMG national leader for human and social services Martin Joyce said, as quoted by the Financial Post.

“This is particularly challenging in the markets of Vancouver and Toronto,” Joyce added. Both markets continue to have a lop-sided effect upon Canada’s average home sales price.

KPMG’s study noted that the debt-to-income ratio among Canadians in the 23-38 age bracket is roughly 216%, compared to the 125% among members of Generation X when they were at the same age, and the 80% among baby boomers.

According to a new analysis by the non-profit housing advocacy organization Generation Squeeze, millennials need an average of 13 years to save enough just for the 20% down payment on a new home. This is far longer than the five years that the previous generation needed back in 1976.

“That’s eight fewer years that millennials might have for saving more for their retirement,” Joyce stated. “If they do manage to save up and buy a house now and delay retirement savings, our poll finds 65% of millennials fear they won’t have enough saved for retirement.”  By Ephraim Vecina. 

Residential Market Commentary – Alternative lenders update

The latest check-up on Canada’s residential mortgage industry shows the influence of alternative lenders continues to grow.

Canada Mortgage and Housing Corporation estimates that alternative mortgage lenders headed into 2019 with a market size of between $13 billion and $14 billion.  That is up significantly from the $8 billion to $10 billion, estimated in 2016.

It is a small share of the overall market, but the important point is that it is growing.  Many market watchers believe the federal stress test for mortgage borrowers is fuelling the shift away from the big banks, which still hold 75% of the business.

The most recent quarterly review by CMHC also shows that alternative lenders are taking on riskier loans in the form of second and third mortgages.  The percentage of, safer, first mortgages in the portfolios of large mortgage investment corporations and mortgage investment entities dropped from 88% in 2017 to 77% in 2018.  According to CMHC, that means the proportion of second and third mortgages in the portfolios is bigger.

Among large mortgage investment corporations (those with portfolios of $100 million or more) the share of debt-to-capital rose from 19% in 2017 to 22% in 2018.  Among the small, alternative lenders the rate of debt-to-capital rose from 8% to 9%.

Despite the increased risk, alternative lenders have seen a decline in delinquency rates.  Between 2018 and 2019 the rate slipped from 1.93% to 1.65%.  By First National Financial LP. 

OSFI eyeing stricter rules concerning the use of AI by banks

Canada’s Office of the Superintendent of Financial Institutions recently indicated that it might be tightening the regulations governing artificial intelligence.

Over the past few years, AI-powered solutions have been steadily deployed by banks and other financial entities as smart, cost-cutting measures.

However, this widespread adoption may expose lenders and the general public to risk, especially when it becomes more difficult to explain to stakeholders how the technology arrives at its decisions.

“AI presents challenges of transparency and explainability, auditability, bias, data quality, representativeness and ongoing data governance,” OSFI Assistant Superintendent Jamey Hubbs said last month, as quoted by the Financial Post.

“The credibility of analytical outcomes may erode as transparency and justification become more difficult to demonstrate and explain,” Hubbs added. “There may also be risks that are not fully understood and limited time would be available to respond if those risks materialize.”

In a contribution for Forbes last year, author and futurist Bernard Marr warned that potential decision-making hazards can lead to the tool doing more harm than good.

“Biased AI systems are likely to become an increasingly widespread problem as artificial intelligence moves out of the data science labs and into the real world,” he said.

“An algorithm might pick a white, middle-aged man to fill a vacancy based on the fact that other white, middle-aged men were previously hired to the same position, and subsequently promoted. This would be overlooking the fact that the reason he was hired, and promoted, was more down to the fact he is a white, middle-aged man, rather than that he was good at the job.”

Marr stressed that AI still needs intensive refinement before being rolled out for large-scale use in mortgage and other critical financial sectors.

The implications on the mortgage space are particularly serious, as AI might not consider the human circumstances that lead to problems such as delinquency or misleading documentation, only the results of such problems.  By Ephraim Vecina. 

Economic Highlights

Market Commentary: An update on rates and January employment numbers

Wow has the world changed since last commentary. How? Well for one, coronavirus was just a twinkle in the eye of whatever host it mutated from. Two, if I was reading Twitter correctly, World War 3 was on its way because of the Iran situation. Crazy how fast things change. Markets now are less interested on the latter and completely focused on the former. Don’t believe me? Just look at the Google trend:


*note: this does not include any of the 1,000  Bing users

Because remember, average consumer sentiment drives these markets!


So where have rates gone in the wake of the coronavirus pandemic? The 5 year GoC is currently yielding 1.36% while the 10 year is yielding 1.34%. The ‘belly’ of our curve is still inverted. Compared to a week ago, the 5 year was yielding 1.28% and the 10 year was yielding 1.27%. If you go back a month, around the time of our last commentary (we hear you marketing ladies), both the 5 and 10 year Government of Canada Bonds were yielding 1.63%.

Canada Mortgage Bonds are also lower than a month ago. The current 5 year CMB is yielding 1.64% and the current 10 year is yielding 1.71%. Compared to a month ago, the 5 year is 25 bps lower and the 10 year is 30 bps lower. It’s a good time as ever to explore an early rate-lock with First National. Help us, help you.


How’s the economy doing? Well better than the Bank of Canada would have you believe. The last Bank of Canada meeting and statement came off as ‘dovish’ to many in the market. If you recall, the Bank’s signaling for further potential rate cuts was focused around an extension of further weakness in data. Since then, we’ve had precisely the opposite.

Case in point, today brought January Canadian employment numbers. The job market beat expectations adding 34.5K jobs vs the 17.5K expected. The unemployment rate also fell to 5.5%. That’s all-around good news. Full-time positions rising 35.7K was also encouraging, as was the average hourly earnings of permanent workers gaining 4.4%. If there was one negative, private sector jobs only grew +5,000 versus the public sector, which made up the majority of the job creation at 21.3K.

Today’s strong job numbers only added to the string of strong economic data that beat expectations.  Retail sales, GDP and trade reports since the last Bank of Canada meeting have all exceeded market expectations. All in all, signs point for the potential for rate cuts in 2020 as being lower. The market is currently pricing a 5% chance of a rate cut on the next meeting date, March 4th.

Finally, the POTUS also known as Donald Trump was acquitted on his impeachment by the Senate this past week.  With all the drama and lack of bipartisanship south of the border, I guess we can find solace that our Prime Minister’s biggest shake up has been his new beard. What will he do next?  By Andrew Masliwec, Analyst, Capital Markets, First National Financial.

January Starts 2020 With Strong Canadian Job Growth

January follows December in erasing the weak November job numbers providing good news for the Canadian economy. Manufacturing led the way as the jobless rate fell, and wage growth accelerated meaningfully. The robust labour market, coupled with consumer confidence holding firm in January at about historical averages, is a reassuring sign for the resilience of the economy. 

Canada’s economy created 34,500 net new jobs in January, all in full-time positions, beating economists’ expectations. The unemployment rate fell slightly to 5.5%, wage growth accelerated to 4.4%, and hours worked rose by 0.5%. This second strong reading of Canada’s job market will reinforce the Bank of Canada’s assessment of the underlying health of the Canadian economy.


Slowing activity in the second half of last year was more a function of temporary disruptions and geopolitical tensions. Some of these factors remain, augmented by the coronavirus, which has disrupted travel and trade and dramatically reduced energy and other commodity prices.



Manufacturing and construction led the job gains, and agriculture picked up as well. Quebec, Manitoba and New Brunswick posted employment gains. Fewer people were employed in Alberta, and the jobless rate spiked in Saskatchewan. The resumed decline in oil and other commodity prices has hit both prairie provinces hard. 

British Columbia continued to boast the lowest unemployment rate by province, followed by Manitoba, Quebec and Ontario (See table below).

Bottom Line: Canada’s economy has been boosted by the fastest pace of immigration in the Group of Seven countries, spurring a housing boom that is pushing up demand for everything from plumbers to electricians. Indeed, Bloomberg News recently highlighted the more substantial surge in male employment in Canada relative to the US, where women have eclipsed men as the majority of jobholders.


Female job growth in Canada is also strong, and labour force participation rates are higher in Canada than in the US. The jobless rate for women age 25 and older is only 4.6% in Canada, compared to 4.9% for men. 

According to Bloomberg News:

  • Jared Menkes, executive vice president at Toronto-based Menkes Developments Ltd., said finding enough labour is a constant source of angst. Central Toronto posted the fastest-growing population in North America last year with a dozen office buildings and countless condos under construction, along with 25 light rail stations, hospitals and all sorts of infrastructure work (see chart below). “We are short actual labour, whether it’s a crane operator, whether it’s drywallers, electricians, plumbers, drivers,” Menkes said. “We’re short truck drivers, architects, consultants.”


Roughly half of all immigrants to Canada located in Ontario, but as the second chart below shows, Quebec and British Columbia garnered their fair share of new residents as well. The Bank of Canada highlights this factor in suggesting that the economy will continue to grow in 2020 and 2021. Certainly, it is a strong positive for the housing markets in these provinces.

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

Mortgage Interest Rates

Prime lending rate is 3.95%.  Bank of Canada Benchmark Qualifying rate for mortgage approval is still at 5.19% but the pressure is on to see if other Banks and the BOC will follow suit now that TD Bank lowered its 5 year posted rate to 4.99%.  Changes to the mortgage qualifying rate is coming into effect April 6, 2020: Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%. 

Fixed rates are moving down slowly with lower bond yields.  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

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

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

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