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Data sheds light on big banks and mortgage market

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While much has been made of forecasts and feelings regarding Canada's mortgage market in the last few months, nothing compares to cold, hard facts. Fortunately, Canadian Mortgage Trends has compiled a list of various figures from Canada's six largest banks to give a glimpse into the current state of the market. Citing quarterly earnings reports, presentations and conference calls, the data gives Canadian consumers a peek behind the window dressing at Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), National Bank of Canada (NBC), Royal Bank of Canada (RBC), Scotiabank and TD Bank.

Mortgage activity rises for most
Outside of CIBC, which saw mortgage activity decline by $1.3 billion during the second quarter of 2013, all other banks tracked saw year-over-year increases. BMO experienced a 13.7 percent rise in mortgage balances compared to the same time last year, as well as 1.9 percent on a quarter-over-quarter basis. NBC saw residential mortgage activity rise 13 percent year-over-year, as well as 4 percent quarterly. RBC had its residential mortgage volume rise 5 percent year-over-year during the second quarter, reaching $177 billion. Scotiabank's residential mortgage portfolio reached $188 billion during the second quarter, marking a 27 percent increase on a year-over-year basis. Finally, TD Bank also experienced an increase in residential mortgages, it's portfolio reaching $156 billion during the second quarter. This is up from $155 billion during the last quarter, as well as $145 billion during the same time last year. Continue reading →

Banks see rate increases, mortgage brokers still offer deals

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News of Canadian banks increasing their mortgage rates has some mortgage brokers on edge, according to an article from Mortgage Broker News. The main area of concern? That monolines will follow suit.

Monolines are mortgage lenders that focus solely on mortgages. Whereas banks and credit unions have other loan types and products to sell, monolines are focused on home loans. Mortgage brokers are often able to obtain mortgages with ultra-low rates from these lenders, helping them get business from homebuyers looking for rates lower than the big banks can offer. However, if monolines begin raising their mortgage rates along with banks and credit unions, that competitive edge may disappear for brokers.

It's been widely reported that the Royal Bank of Canada increased its rates. The rate on four-year closed mortgages is set to increased 10 basis points, reaching 3.09 percent, while the rate on five-years will rise 20 basis points, reaching 3.29 percent. Meanwhile, the posted rate on a one-year mortgage is set to increase 14 basis points, reaching 3.14 percent, while two- and three-year mortgage rates are rising 10 basis points, reaching 3.14 and 3.65 percent, respectively. Continue reading →

Mortgage rates rise along with housing starts

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Rays of sunlight are peeking through the clouds that have been hanging over the Canadian real estate market as of late.

According to the Canada Mortgage and Housing Corporation, the seasonally adjusted annual rate for housing starts during May was 200,178 units. This marks a significant increase from 175,922 units during April. As far as urban housing starts go, the seasonally adjusted annual rate increased 14.6 percent during May, reaching 177,234 units. This can be attributed to a 22.2 percent increase in multiple urban starts, reaching 114,346 units. Meanwhile, single urban starts rose 3 percent during this time period, reaching 62,888 units.

According to The Globe and Mail, these figures, along with positive data regarding the addition of new Canadian jobs, has led to the Canadian dollar gaining in value.

"May's increase in home building suggests overall housing construction continues to garner support from condominium-related building, although the overall levels are still off from the highs seen in mid-2012 when the market was more frothy," said Emanuella Enenajor, economist at CIBC World Markets. "Today's data could mean that homebuilding activity in Q2 could be less of a drag than seen in the prior quarter, although we continue to see this sector struggling on weak secondary market activity, the fading impact of low rates and buyer fatigue." Continue reading →

Low mortgage rates can offset high prices

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While rising home prices are good news for sellers and buyers seeking a sound investment, they can also make it that much harder for some Canadians to enter into homeownership.

As a recent article from The Globe and Mail points out, even with mortgage tightening and a dip in sales, home prices continue to remain high throughout the country. As home sales decreased, so did the number of homeowners putting their properties up for sale, keeping the inventory of available properties fairly low, and, by extension, prices high.

"The latest data suggest that the softening in prices is likely to be milder than expected," the article stated. "In Vancouver, the city that was the frothiest in 2011 and the hardest hit by last year's correction, prices did decline. But they're already on the mend." Continue reading →

Canadians saving more, paying off mortgages faster

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Who says Canadians can't save?

According to an article from The Globe and Mail, the Canadian personal savings rate is twice that of our neighbors to the south, and nearly six times higher than it was 10 years ago.

"All the talk about the Canadian household being tapped out or out of shape is a bit overdone," Doug Porter, chief economist at BMO Nesbitt Burns, told the news source.

Data from Statistics Canada shows that the savings rate during the first quarter of 2013 was 5.5 percent, up from 5.4 percent during the final three months of 2012. That may not seem like a large improvement, but it's important to keep in mind that the original forecast for the savings rate during the fourth quarter of last year was 3.8 percent, according to Statscan. Continue reading →

Possibility of rate increase looms

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Among all the ups and downs in Canada's housing market over the last few months, one thing has remained certain: Mortgage rates are low. This has spurred homebuyers and homeowners alike to obtain new mortgages or refinance their current ones, offsetting the cooldown in sales due to Finance Minister Jim Flaherty's restrictions on government-backed mortgages.

However, some industry observers are exploring the possibility that rates may be rising sooner rather than later.

"If you're house hunting or thinking of refinancing, and you don't have a mortgage rate hold, consider getting one," writes Rob McLister for Canadian Mortgage Trends. "Canada's 5-year bond yield just pierced a three-month high. That means – barring a big reversal - there's a good likelihood that fixed rates will ratchet higher. (Bond yields steer fixed mortgage pricing, most of the time.)"

Continue reading →

Many urban Canadians opt for condos

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Home sales may be slowing down, but a report from the Bank of Montreal shows that plenty of Canadians are looking to enter the condominium market.

The BMO Housing Confidence Report is based on survey responses from homeowners in four of Canada's major cities: Toronto, Vancouver, Calgary and Montreal. The goal of the survey was to examine buyer intentions regarding the next five years.

In Toronto, nearly one-third (31 percent) of respondents said they plan to purchase a condo in the next five years. This represents an increase of 11 points from the fall. Meanwhile, in Vancouver, buyer intention regarding condos has fallen five points during the same time period, with only 28 percent of respondents saying they planned to buy a condo in the next five years. Continue reading →

CAAMP report highlights mortgage rates, types

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It's time yet again for the Canadian Association of Accredited Mortgage Professionals' semi-annual mortgage market survey, a tradition dating back to fall 2005. The May 2013 release from the CAAMP, Change in the Canadian Mortgage Market, focuses yet again on trends among homebuyers, as well as the effects mortgage tightening rules have had on the market overall.

"At this point, it's important to support the economic contribution that housing makes, instead of further restricting it," Jim Murphy, president of the CAAMP, told Canadian Mortgage Trends. "The market was already slowing when the last set of rule changes were implemented. Now the market has slowed further and we feel the changes put in place have gone far enough."

Data from the CAAMP report, which was prepared by the organization's chief economist, Will Dunning, is based partly on an online survey of 2,000 Canadians during April 2013. Continue reading →

Flaherty says government intervention is done, others say differently

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While many industry observers feel that the mortgage restrictions put in place by Finance Minister Jim Flaherty could lead to a crash in the Canadian real estate market, Flaherty feels that current figures are a positive sign, according to Financial Post.

"I'm comfortable about where we are," he told Julian Beltrame of the Canadian Press. "I'm pleased in particular that the condo market in big cities has fallen back. I'm also pleased with some other moderation in new house construction and in demand for mortgages. I think these are healthy developments because I think we were beginning to see some indications of the beginning of a bubble."

Flaherty went on to tell Beltrame that he has no further plans to intervene in the Canadian mortgage market because he doesn't need to, indicating that the previous restrictions put in place have done a satisfactory job.

It's easy to see why this news could lead mortgage professionals to breathe a sigh of relief. The last mortgage restrictions to be put in place, which included shortening the maximum amortization length on government-backed home loans from 30 years to 25 years, seemed to have a large impact on homebuyers when they went into effect during July 2012.

This also comes on the heels of rumors that The Office of the Superintendent of Financial Institutions Canada (OSFI) was considering limiting the amortization rate on uninsured mortgages to 25 years. Continue reading →

Mortgage rates present opportunity

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Historically low mortgage rates are continuing to make homeownership affordable for Canadians, according to the Royal Bank of Canada.

Data from the RBC's Housing Trends and Affordability report shows that low mortgage rates are keeping Canadian homeowners from entering dangerously unaffordable territory. Additionally, the report stated that rate increases are likely not on the horizon.

"Exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years; yet, we believe that the likelihood of a surge in rates is slim at this stage," the report stated.

Continued low mortgage rates are good news for Canadians, especially as a report from the Certified General Accountants Association of Canada shows that while many Canadians are satisfied with their finances, they're not necessarily keeping on top of them. Continue reading →