CanEquity Blog on Mortgages

Home prices across Canada continued to rise this month, prompting a fresh wave of concern over a possible housing bubble, according to a recent analysis in the Financial Post.

Statistics Canada recently released a report showing home prices in March went up 0.3 percent, marking the 12th consecutive month of increases, according to the Post. Coupled with a report from the Canadian Mortgage and Housing Corporation that showed new home starts up 14 percent in April, the news has some politicians warning – again – of a potentially detrimental housing bubble.

The two most notable doomsayers, Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, have been clamoring for consumers to reign in borrowing to prevent a collapse. According to Carney, consumer debt in Canada poses the greatest domestic threat to the economy. Despite their dire rhetoric, neither man has used his position to implement measures that might slow the market. Continue reading »

Canadian mortgage rates have been hovering at all-time lows for roughly two years, since the Bank of Canada lowered its overnight target lending rate to 1 percent in 2010. But with the bank indicating it may soon raise interest across the country, many have been wondering whether average Canadians are ready for the financial burden. One new study said most of them are.

A large majority of Canadians have been taking steps to mitigate the risk of higher monthly mortgage payments due to interest rate hikes, and most appear capable of absorbing a 2 percent interest rate hike over the next couple years, according to Toronto Dominion Bank economist Francis Fong. In a recent study, he and his organization noted that many Canadians have been paying down their home loans and tackling household debt, reported The Globe and Mail. Continue reading »

Lots of changes are coming for the Canadian Mortgage and Housing Corporation, starting with some new oversight from the Office of the Superintendent of Financial Institutions. But what will this mean for consumers looking for a mortgage? For many, the new rules will make home loans easier to get through an alternative mortgage broker.

More stringent oversight of the CMHC will mean the agency can back fewer mortgages. Ministers have already declined to raise the current $600 billion cap on mortgages backed by CMHC, and as the agency nears that limit, some mortgage lenders might become reluctant to issue new loans. In a note to clients obtained by the Financial Post, GMP Securities Analyst Stephen Boland said customers at bigger banks will feel the new restrictions most keenly. Continue reading »

Canadian homeowners are good at paying their debts on time, a new study suggests. The Canadian Imperial Bank of Commerce recently released its Household Credit Analysis report, which shows the rate of mortgage delinquency across the country is just 0.4 percent.

The highest delinquency rate appears to be in Alberta, where 0.7 percent of homeowners are behind on their home loans. According to CIBC, this could be because of a high rate of younger, less established homeowners in the region. The figures are still far healthier than the delinquent mortgage rate of U.S. homeowners, which credit rating agency TransUnion places at 5.78 percent, according to The Associated Press.

The mortgage market as a whole is starting to show some signs of moderating, according to CIBC. Increased regulation of the Canadian Mortgage and Housing Corporation, as well as increased use of full-scale appraisals during adjudication, are both contributing to this trend, said Benjamin Tal, deputy chief economist at CIBC and author of the report. Continue reading »

In a speech to the Mortgage Brokers Association on May 7, Bank of Canada deputy governor John Murray revealed some of the thinking behind his organization's decision to keep interest and mortgage rates low, and how it could affect rampant borrowing in the housing market.

The entire goal of Canadian monetary policy, according to Murray, is to keep annual inflation at roughly 2 percent. Steady inflation helps individuals and corporations make informed decisions on long-term investments without worrying about a sudden spike in prices. Once bankers and policy makers move beyond the conceptual level, however, things get a bit more complicated, Murray noted.

"Changes in the overnight interest rate influence the interest rates that the market sets on securities further out the yield curve and with different risk and liquidity characteristics – for example, mortgage rates," he said. "They also influence the exchange rate – the external value of the Canadian dollar. Movements in these asset prices, in turn, affect aggregate demand in the Canadian economy by influencing the spending and investment decisions of both Canadians and foreigners." Continue reading »

Like flowers blooming in the spring, the Canadian countryside has seen a veritable bouquet of new houses pop up in the last month. The Canadian Mortgage and Housing Corporation recently announced housing starts in April hit 244,900, far surpassing most analysts' expectations.

The seasonally adjusted numbers were up 14 percent from March, and roughly 20 percent above industry experts' predictions. A Bloomberg sampling showed most Canadian real estate experts anticipated there would be 204,000 starts in April. Just 67,700 of the starts were single-family detached homes.

“Most of the increase was in the multiples segment,” said Mathieu Laberge, deputy chief economist at CMHC’s Market Analysis Centre. "The increase in this segment is partly a reflection of the high level of pre-sales in large multi-unit projects since 2011, which is in line with job gains over the last year." Continue reading »

Potential homebuyers in Nova Scotia may soon have access to a good deal more information about their mortgage broker than ever before, thanks to new provincial regulations that are currently under debate.

The rules are designed to give consumers more peace of mind and confidence that the broker they are dealing with is qualified and has their best interests in mind, according to a Canadian Mortgage Trends analysis. The proposed law would require that individual agents be licensed, set minimum broker education standards and increase disclosure to the client. Those disclosure recommendations are receiving mixed reviews from mortgage professionals, according to the source.

One regulation would have brokers disclose their commission rate to the client, something not favored by the industry. An executive with the Mortgage Brokers Association of Atlantic Canada recently spoke out against the provision, noting that bank mortgage specialists and other salesmen aren't required to disclose their pay, reported CMT.

Another provision requires mortgage brokers to explain why they placed a client with a particular lender. Most industry insiders appear to favor this disclosure, which would take the form of a short, three- of four-sentence letter outlining the decision to the client, according to the source. Continue reading »

Renting versus buying is an age-old conflict played out on the battlefield of the Canadian housing market. On the one hand, renting can be more flexible and requires little in the way of credit. On the other, home loans help build equity and leave borrowers with their own property after all is paid off. It's a tough call to make at the best of times, but with a befuddling blend of historically low mortgage rates and over-inflated home prices, what's a Canadian to do?

There are a number of market factors in play right now that Canadians should consider when pondering the rent vs. buy debate, according to housing expert Ben Rabidoux. In a new column for The Globe and Mail, he lays out some of the biggest issues facing renters and buyers in today's economic climate.

Home prices have been rising in most areas of the country, he notes. But while this is usually an indicator that it's time to buy, rent has been rising at a much slower rate. Rabidoux points out an interesting report issued by the San Francisco Federal Reserve Bank in 2004, which cited rapidly-rising home prices and slow-rising rent as an indication of a potentially dangerous housing bubble. Two years after the report was issued, U.S. home prices peaked and began their rapid decline. Continue reading »

April weather has been a mixed bag across much of Canada, but as May arrives and spring firmly takes hold, things appear to be settling down. Not so in the economy and housing market, unfortunately. A financial storm is still raging through much of Europe, and Canadian mortgage rates lie squarely in its path.

Much of the turmoil in Europe is due to political uncertainty. Many of the major countries in the euro zone, including France and Greece, are in the midst of election season, while Denmark's coalition government recently collapsed, reported Troy Media. With Spain and the United Kingdom both struggling, even Germany, the last bastion of financial stability in the region, appears to be suffering from second-hand effects of the recession.

These down-trending European economic indicators could send ripples across the Atlantic into Canada and the United States. Continue reading »

Much has been made of the historically low mortgage rates currently driving home sales across Canada, but when it comes to finding the perfect home loans, rates are only one part of the equation.

Advertisements for the best mortgage rates are everywhere, but there is less information readily available regarding mortgage terms, according to mortgage expert Robert McLister. Writing in The Globe and Mail, McLister points out that the length of a mortgage will ultimately determine how much interest homebuyers pay.

Choosing between a longer, fixed-rate mortgage and a shorter, variable-rate mortgage is an important decision, and the pros and cons should be weighed carefully, according to McLister. A lengthier mortgage term provides certainty and stability for those whose financial situations might change, while a shorter mortgage could be beneficial to those who are in a position to pay off large chunks of it within the first few years or who are planning to move soon. Continue reading »