Bank of Canada hike: Have borrowers views on the market changed

Fergal McAlinden
other

A number of factors are set to weigh on affordability in the mortgage market in the near future
After months of speculation, the inevitable finally arrived at the beginning of March: the Bank of Canada announced the first hike to its benchmark policy rate of the COVID-19 pandemic era, bringing an end to nearly two years of rock-bottom low rates.
The move was the first of several anticipated rate increases for 2022, with the Canadian Real Estate Association (CREA) noting in its updated Resale Housing Market Forecast that those hikes were likely to play a significant role in impacting the country’s housing market this year and next.
The association said that nine Bank of Canada rate increases of 0.25% each appear plausible, if not likely, by the end of 2023, a trajectory that could have a potentially transformative impact on Canadians’ attitudes toward the housing market.
For now, though, the Bank’s opening hike of its 2022-23 cycle doesn’t appear to have caused much alarm among mortgage shoppers or prospective homebuyers.
Cyrus Habibi (pictured top), an associate mortgage broker with Premiere Mortgage Centre in Halifax, Nova Scotia, said that there had been little shift in clients’ views since the news of the Bank hike broke a matter of weeks ago.
“With our clients, we’re not seeing much of a change in attitudes following the Bank of Canada statement,” he told Canadian Mortgage Professional. “On fixed vs. variable, the clients that would have gone for variable are still going for that option, and likewise for fixed.”
Read next: Bank of Canada hikes rate
With variable-rate mortgages typically tied to the Bank’s policy rate, those options have witnessed a surge in popularity as that central bank trendsetting rate plunged during the pandemic.
Discounted five-year mortgage rates were already on the rise in 2021, but with the benchmark rate now also crawling upward, the future of the fixed-vs-variable debate will be an intriguing one to follow.
Still, Habibi said that the spread between variable and fixed remained so wide that the Bank hike had done virtually nothing to change clients’ preferences on the matter.
“If someone is concerned about the possibility of rate hikes and the impact that they’ll have, then they were probably never going to go for variable anyway – it wouldn’t be the right option for them,” he said. “It just depends on the individual preferences of the client.”
Shirl Funk, a Winnipeg-based broker with The Mortgage Centre, said that she had seen some customers enquire about making a change in light of the Bank’s announcement, although she also noted that the hike was unlikely to precipitate any kind of cooling-off in the market.
“[Some of] the customers that are variable right now are starting to call me and say, ‘How do I lock my rate?’” she said. “I’ve had a few calls on that already. I don’t think it’s going to change and it’s not going to slow down. Everybody’s just buying houses.”
The impact of projected rate hikes this year and next could be most keenly felt among Canadians who already have a mortgage. An Angus Reid poll earlier in March indicated that 58% of mortgage holders in Canada view their payments as disproportionate to their incomes.
Read next: Another Bank of Canada rate hike likely in April: BMO economist
The firm described inflation, which recently topped a 30-year high in Canada, as the “spectre” that pervades almost every economic conversation across the country, with interest rate increases one of the Bank’s main ways of ensuring that phenomenon doesn’t spiral out of control.
“The Bank is expected to continue to raise rates this year to fight inflation,” Angus Reid said, “and the impact could be significant on those with variable rate mortgages and those whose fixed rate mortgages come up for renewal soon.”
RBC Economics has also recently sounded something of an economic alarm for Canadians, warning that ballooning inflation and the escalating crisis in Ukraine were likely to have a sizeable negative impact on the household savings amassed throughout the pandemic.
“As the surge in [consumer] prices boosts revenue for producers of… commodities – including in the Canadian oil and gas and agricultural sectors – it will also eat into the stockpile of household savings built up during the pandemic,” the banking giant said in a report.
Skyrocketing oil prices in recent weeks would add $600 per household, or $10 billion per year, to the cost of gasoline compared with several weeks ago, it added.

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2022 Competitive Market Continues as Buyers Scoop Up Influx of New Listings

Daniel Crook
other

 Despite a sharp uptake in new listings, buyers will continue facing strong competition if they’re looking to buy in today’s market, according to the latest numbers from the Canadian Real Estate Association (CREA).

In their February 2022 release, CREA reports that new listings increased by 23.7% month-over-month.  While the increase in available properties is welcome to worn out buyers, the sales-to-new-listings ratio (SNLR) remains high at 75.3%. This is the ratio that compares the number of sales in a given time to the number of new listings becoming available. A market that favours sellers is usually above 60%. February saw an improvement over the historically low SNLR of 89.4% in January 2022. For reference, the long term average of this metric is 55.1%. 

Property sales rose by 4.6% over last month. While encouraging, this means properties are still available to snap up. The increase in activity is likely a result of the rebound in new listings following the 10.8% decline in January. Additionally, this strong activity may continue as listings that came on to the market in late February continue to sell into March.

Related Read: Why this might be the best time in 2022 to sell your home

Despite this renewed activity, the SNLR does mean that market conditions still greatly favour sellers. The historically low levels of stock have carried over from last month despite the bounce in new listings, still sitting at 1.6 months of inventory, tied with January 2022 and December of last year for the lowest levels ever recorded. 

The continued competitive market means the National Home Price Index Benchmark Price broke a further record this month, up 3.5% month over month and 29.2% year over year in February, bringing the average price of a home to $868,400.  The actual (not seasonally adjusted) national average sale price posted a 20.6% year-over-year gain in February.

The Future is Still Competitive, but There is Room for Optimism

The bounce in new supply follows a similar trend to the previous two years. The seller’s market is expected to hang around for the near future, but there is optimism that new listing numbers will continue to rapidly improve. CREA’s senior economist, Shaun Cathcart, says:

“In the short term, expect at least one more month of stronger sales as the majority of those new listings came onto the market near the end of the month so many of the associated sales likely won’t happen until early March. Ideally, listings will continue to come out in big numbers in the months ahead. Combined with higher interest rates and higher prices, we could be at a turning point where price growth begins to slow down and inventories finally begin to recover after seven years of declines. Still, in order to turn this market back towards balance long-term, building more new homes across the spectrum remains the key.” 

 

Price Growth Continues Across Ontario

Price gains have continued across Ontario, according to CREA’s data, with Bancroft, Brantford, Cambridge, North Bay and London & St Thomas seeing year-over-year growth of over 40%. 

Here’s how five of Ontario’s major areas faired in February:

The GTA

After their lowest levels in two decades, listings in Toronto have seen an improvement, with 14,147 new listings for February. Contrasting this with 9,097 sales, the SNLR now sits at 64% for the area – the best we’ve seen for buyers in months. Listings have dipped by 6.5% year over year, considerably less than sales, which has dipped by just over 17%. The benchmark price, however, has seen a 35.7% increase year over year, up to $1,333,000.

Ottawa

New listings in Ottawa improved by 11% on last year, with 1,821 homes hitting the market during February. Sales have also bumped over last year by 1.5%, with 1,437 compared to 1,416, leaving us with an SNLR of 77.5%. The benchmark price has risen 15.6% from last year to $718,900, which is also a 2.6% increase on January’s. If stock continues to improve, price growth in the area may start to slow down.

Hamilton-Burlington

The region has once again broken its record for residential properties, with a new benchmark price high of $1,196,200 which is a 33% increase from February of last year. Sales are down 5.6% on last year, with 1,176 transactions completed this month. There has been an ever-so-slight improvement in stock – up 1% from last year, with 1,620 new homes on the market in February. Despite this, inventory remains remarkably low, with just 0.6 months of stock. With an SNLR of 81.7%, the area is still hugely more beneficial to sellers.

Kitchener-Waterloo

Kitchener-Waterloo is still firmly planted in a seller’s market, with an SNLR of 82.8%, a 1.9% increase from last year. New listings in the area are up 11.2% over last year, with 835 homes hitting the market in February, while there were 625 sales, a 2.1% increase in last year. The improvement in new listings has led to a very small increase in stock to 0.5 months of inventory from 0.3 in January. The benchmark price now sits at $945,100, an increase of 36.5% year over year.

London St. Thomas

As is the trend with a lot of Ontario’s most impactful areas, London St. Thomas has seen an improvement in stock, with 1,086 new listings in February, an 8.4% increase from last year, and also a record for the area. But with the inventory remaining at 0.5, it illustrates the imbalance between the demand for homes and the inventory shortage. With 875 sales last month, the SNLR for the area stands at 84.7%, a 0.2% dip year over year. The MLS HPI has seen a 41% jump from last year to a total of $735,600.

 

© 2015 – 2021 Zoocasa Realty Inc., Brokerage

2022 Competitive Market Continues as Buyers Scoop Up Influx of New Listings

Daniel Crook
other

Despite a sharp uptake in new listings, buyers will continue facing strong competition if they’re looking to buy in today’s market, according to the latest numbers from the Canadian Real Estate Association (CREA).

In their February 2022 release, CREA reports that new listings increased by 23.7% month-over-month.  While the increase in available properties is welcome to worn out buyers, the sales-to-new-listings ratio (SNLR) remains high at 75.3%. This is the ratio that compares the number of sales in a given time to the number of new listings becoming available. A market that favours sellers is usually above 60%. February saw an improvement over the historically low SNLR of 89.4% in January 2022. For reference, the long term average of this metric is 55.1%. 

Property sales rose by 4.6% over last month. While encouraging, this means properties are still available to snap up. The increase in activity is likely a result of the rebound in new listings following the 10.8% decline in January. Additionally, this strong activity may continue as listings that came on to the market in late February continue to sell into March.

Related Read: Why this might be the best time in 2022 to sell your home

Despite this renewed activity, the SNLR does mean that market conditions still greatly favour sellers. The historically low levels of stock have carried over from last month despite the bounce in new listings, still sitting at 1.6 months of inventory, tied with January 2022 and December of last year for the lowest levels ever recorded. 

The continued competitive market means the National Home Price Index Benchmark Price broke a further record this month, up 3.5% month over month and 29.2% year over year in February, bringing the average price of a home to $868,400.  The actual (not seasonally adjusted) national average sale price posted a 20.6% year-over-year gain in February.

The Future is Still Competitive, but There is Room for Optimism

The bounce in new supply follows a similar trend to the previous two years. The seller’s market is expected to hang around for the near future, but there is optimism that new listing numbers will continue to rapidly improve. CREA’s senior economist, Shaun Cathcart, says:

“In the short term, expect at least one more month of stronger sales as the majority of those new listings came onto the market near the end of the month so many of the associated sales likely won’t happen until early March. Ideally, listings will continue to come out in big numbers in the months ahead. Combined with higher interest rates and higher prices, we could be at a turning point where price growth begins to slow down and inventories finally begin to recover after seven years of declines. Still, in order to turn this market back towards balance long-term, building more new homes across the spectrum remains the key.” 

 

Price gains have continued across Ontario, according to CREA’s data, with Bancroft, Brantford, Cambridge, North Bay and London & St Thomas seeing year-over-year growth of over 40%. 

Here’s how five of Ontario’s major areas faired in February:

The GTA

After their lowest levels in two decades, listings in Toronto have seen an improvement, with 14,147 new listings for February. Contrasting this with 9,097 sales, the SNLR now sits at 64% for the area – the best we’ve seen for buyers in months. Listings have dipped by 6.5% year over year, considerably less than sales, which has dipped by just over 17%. The benchmark price, however, has seen a 35.7% increase year over year, up to $1,333,000.

Ottawa

New listings in Ottawa improved by 11% on last year, with 1,821 homes hitting the market during February. Sales have also bumped over last year by 1.5%, with 1,437 compared to 1,416, leaving us with an SNLR of 77.5%. The benchmark price has risen 15.6% from last year to $718,900, which is also a 2.6% increase on January’s. If stock continues to improve, price growth in the area may start to slow down.

Hamilton-Burlington

The region has once again broken its record for residential properties, with a new benchmark price high of $1,196,200 which is a 33% increase from February of last year. Sales are down 5.6% on last year, with 1,176 transactions completed this month. There has been an ever-so-slight improvement in stock – up 1% from last year, with 1,620 new homes on the market in February. Despite this, inventory remains remarkably low, with just 0.6 months of stock. With an SNLR of 81.7%, the area is still hugely more beneficial to sellers.

Kitchener-Waterloo

Kitchener-Waterloo is still firmly planted in a seller’s market, with an SNLR of 82.8%, a 1.9% increase from last year. New listings in the area are up 11.2% over last year, with 835 homes hitting the market in February, while there were 625 sales, a 2.1% increase in last year. The improvement in new listings has led to a very small increase in stock to 0.5 months of inventory from 0.3 in January. The benchmark price now sits at $945,100, an increase of 36.5% year over year.

London St. Thomas

As is the trend with a lot of Ontario’s most impactful areas, London St. Thomas has seen an improvement in stock, with 1,086 new listings in February, an 8.4% increase from last year, and also a record for the area. But with the inventory remaining at 0.5, it illustrates the imbalance between the demand for homes and the inventory shortage. With 875 sales last month, the SNLR for the area stands at 84.7%, a 0.2% dip year over year. The MLS HPI has seen a 41% jump from last year to a total of $735,600.

 

© 2015 – 2021 Zoocasa Realty Inc., Brokerage

Canadian home prices hit new record high

Fergal McAlinden
other

The average cost of a home across the country has surged by more than 20% in the past year

The average price of a Canadian home hit a new milestone high in February, clocking in at $816,720, the Canadian Real Estate Association (CREA) has said.

That represents a 20.6% increase over last year’s average selling price, with CREA noting that last month’s figures made it the second-busiest February on record for home sales.

Red-hot markets in Toronto and Vancouver heavily skew Canada’s average home price, which falls by about $178,000 if those two cities are excluded from consideration.

Still, CREA’s House Price Index, which is designed to account for the overt influence of the country’s two largest markets, has also witnessed rapid growth during the past year, surging by 29% – its quickest pace ever.

Just over 58,200 homes were sold in February, CREA said, an increase of 4.6% over January figures, with a rebound in new listings reportedly spurring that monthly increase.

The number of homes on the market was up by over 23% on a seasonally adjusted basis, from 62,539 to 77,352.

Read next: Canadian total credit market debt tops $2.65 trillion

In its newly updated Resale Housing Market Forecast, CREA noted that low inventory levels were likely to pose a continued challenge for the housing market in 2022 along with the likelihood of interest rate hikes on the horizon.

That said, a significant cooling is not likely to take place until sometime next year. The organization said it expected about 612,800 properties to sell via MLS Systems in Canada in 2022, marking a decline of around 8% over last year, although it would still considerably outstrip the current second-highest annual figure.

It said that home sales would likely remain “historically strong” in 2023 but begin to edge back toward normality. “Limited supply, higher prices and higher interest rates are expected to further tap the brakes on activity and price growth in 2023 compared to 2022, particularly in Canada’s most expensive markets.”

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Credit reporting trends: what brokers need to keep in mind

Fergal McAlinden
other

Equifax executive on some of the developments that could be on the way

 A host of developments on the credit reporting front are set to have a direct impact on mortgage professionals in 2022, with recent legislation and emerging payment trends some of the key issues brokers and agents should be looking out for, according to a senior Equifax executive.

The credit reporting agency’s director – solutions: mortgage and housing, Eric Poblete (pictured top) told Canadian Mortgage Professional that the ability of Canadian consumers to place a freeze on credit files for fraud prevention was something mortgage professionals needed to remain particularly conscious of.

Provincial legislation to that effect has recently been implemented in Quebec, and Equifax is set to extend that capability to its customers across the country before the end of 2022. It’s already in close consultation with its associates in the mortgage industry about what that will entail.

“We’re working with the insurers, lenders and all the banks so they can see how that’s going to work,” Poblete explained. “Say a customer decides, for the sake of security, to freeze their file, but then that stops every process: they can’t get a credit card, they can’t get a loan, they can’t go through the mortgage process. Everything gets frozen.

“What we’re talking to brokers and lenders about is how that’s going to impact them. In most cases it’s not going to change anything from a file perspective, but it will restrict access to the file and cause a little bit of a delay in regards to how they process it.”

Read next: Equifax: Amid pressures, new mortgage growth slows down

The rising popularity of so-called BNPL (Buy Now, Pay Later) financing is another trend that could be set to impact credit files in a big way in 2022. That approach allows consumers to spread payments for a good across multiple instalments and several weeks, rather than paying through one lump sum.

That could cause headaches for brokers if a client has, for instance, committed thousands of dollars in BNPL payments that aren’t visible on their credit file – something that would likely have a considerable impact on affordability.

It’s essential, then, for brokers to ask the right questions and carry out due diligence to make sure that their clients don’t have any unreported BNPL payments, and, if they do, that they’re able to pay them.

“You’re going to have to ask those questions, because BNPL can cut into affordability,” he said. “Most of the lenders will ask those questions because if they’re lending out hundreds of thousands of dollars and a person can’t even make it through the first six months due to too many other hidden expenditures, that’s going to be quite a difficulty.”

Equifax Canada is still working on its strategy to address the growing prevalence of BNPL, Poblete said, seeking input from local stakeholders on the best approach before it acts on that issue.

Read next: Types of mortgage fraud you need to know about

It’s also targeting a full launch of its education program by the second quarter of this year, having launched the credit certification for the broker community with M3 in 2021.

The conclusion of that eight-module course allows participants to add their status as an Equifax-certified broker to their signatures and marketing materials, with the mortgage course in Canada having emerged as something of a trailblazer for the company worldwide.

“The industry likes it. It’s the first in the world – no other Equifax entity has anything where they actually certify anybody,” Poblete said. “It’s not going to stay just in Canada, and it’s not going to stay just in the mortgage space. We’re in the midst of developing this for lenders, auto and government, because essentially everybody needs education.”

Another recent development on the Equifax front has been its move to a cloud-based infrastructure, the result of a $1.7 billion investment geared at improving its data management, security and overall performance.

The company says the shift should allow for greater innovation among its customer base as well as generating better insights and more effective actions.

“By moving into the cloud, we’re starting to improve our output. The format of personal credit files, for example, has changed – they’re now much more readable, user friendly and easy to digest,” Poblete said.

With the company currently working with the major connectors in the mortgage space to roll out that new format, it should be available to the whole industry by some point in the second half of 2022.

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Scotiabank rating downgraded amid multiple unique risks

Ephraim Vecina
other

Firm Capital MIC announces robust Q4, year-round results

Ephraim Vecina
other

The corporation especially benefited from higher interest income
Firm Capital Mortgage Investment Corporation has announced strong results for the three and 12 months ending December 31, 2021.
In Q4 2021, the MIC saw its net income increase by 5.7% annually to reach $7.734 million. The company’s net income for the whole year grew by 13.8% to end up at around $29.985 million.
“The increase is mainly a result of higher interest income due to a larger average investment portfolio size over the year (an annual average balance increase of $44 million), offset by a decrease in average interest rate on the investment portfolio,” Firm Capital said.
Average profit per share for Q4 2021 was $0.234 versus $0.249 per share during the same period the year prior. Meanwhile, average profit per share for all of 2021 was $0.950 compared to 2020’s level of $0.913 per share.
Read more: Firm Capital appoints newest Calgary executive
Firm Capital’s investment portfolio increased by $83.5 million to reach $642.5 million as of the end of December 2021, versus $559 million the year prior. During 2021, new investment funding totalled $515.5 million (2020: $399.4 million), and repayments amounted to $432 million (2020: $321.5 million).
Total gross investment portfolio as of December 2021 stood at $642,531,533, with conventional first mortgages representing 73% of the total portfolio. Total conventional mortgages with loan-to-values less than 75% comprised 82% of the total.
“The corporation continues to exceed its yield objective of producing a return on shareholders’ equity in excess of 400 basis points over the average one-year Government of Canada Treasury bill yield,” Firm Capital said. “Income for the year ended December 31, 2021 represented a return on total shareholders’ equity (based on the average of the month end shareholders’ equity in the year) of 8.46%, representing a return on total shareholders’ equity of 771 basis points per annum over the average one-year Government of Canada Treasury bill yield of 0.75%.”

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RBC: Revenge spending to run into inflation without growth

Ephraim Vecina
other

The possibility of stagflation is very real in the current environment, RBC CEO says

 An emerging risk of Canadian consumers spending their pent-up pandemic savings is higher inflation without significant growth, according to Dave McKay, CEO of the Royal Bank of Canada.

This will be spurred by the seemingly inexorable growth of housing prices in major markets like Toronto, Vancouver, and Montreal, a trend that will impede economic growth by cutting into other categories of household spending, McKay said.

“We’re increasingly becoming concerned that, with the lack of supply of labour, the lack of supply of goods, the cost of energy increasing, that we’ll consume these savings — and will the spending power just lead to an inflationary environment without growth, or, in the worst case, stagflation?” McKay said. “I think that risk has increased.”

Read more: Analysts: BoC can no longer count on a stronger loonie vs. inflation

Data from the Canadian Real Estate Association indicated that the national average home price reached a record high of $748,450 in January, representing a 21% annual gain that was heavily influenced by sales in Greater Vancouver and the GTA.

“Consumers have made the decision to stretch themselves into a house,” McKay added. “I worry about the drag it has on the economy as we raise rates and have more disposable income going to servicing debt.”

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Burnaby 26-unit multi-family rental sells for $8.8 million

Macdonald Commercial
Western Investor

Villa Fortuna, in the popular shopping district of Burnaby Heights and close to Simon Fraser University, sold for $1.8 million above its assessed value.

Type of property: Multi-family rental

Location: 4129 Albert Street, Burnaby, B.C.

Number of units: 26

Size of property: 18,200 square feet

Size of lot: 16,104 square feet

Size of lot, in acres: 0.37 acre

Zoning: RM3

BC Assessment value: $7.01 million

List price: $9.3 million

Sale price: $8.8 million

Date of sale: February 18, 2022

Brokerage: Macdonald Commercial, Vancouver

Broker: Sam Emam

© 2022 Western Investor