26 May

CMHC Forecast: All Is Not Equal Across Country


Posted by: John Dunford

Housing markets are expected to remain stable for the rest of the year, and starts are expected to moderate in 2015 and 2016 according to the Canada Mortgage and Housing Corporation (CMHC).

“Lower oil prices are contributing to disparities between provincial housing markets,” Bob Dugan, chief economist for CMHC said in an official release. “A slowdown in housing starts and resale transactions in oil-producing provinces such as Alberta will be partly offset by increased housing market activity in other provinces, such as Ontario and British Columbia, which benefit from the positive impacts of declining energy prices, a lower Canadian dollar and continued low mortgage rates.”

Housing starts are expected to decline by 4.1 per cent – and range between 166,540 and 188,580 units — in 2015. Prices, meanwhile, are expected to increase by 3.4 per cent.

As for the near future, housing starts are expected to range between 162,840 and 190,830 in 2016.

“Since the inventory of completed and unabsorbed units remains above the historical average, we expect the pace of new home construction to moderate over the next couple of years as builders focus on managing the existing inventory,” Dugan said.

The average price is expected to fall between $402,139 and $439,586 this year and between $398,191 and $457,200 in 2016.

“The gradual slowdown in the rate of price growth is explained by the expected change in the composition of MLS® sales toward more moderately priced homes,” the Crown Corporation said in its official release. Due to the recent decline in oil prices, our assessment is that there is more downside risk than upside risk to our forecast.

25 May

Analysts Expect BoC To Leave Interest Rate Unchanged This Week


Posted by: John Dunford

The Bank of Canada will announce its latest decision on interest rates this Wednesday morning at 10am but analysts are fairly united on their forecasts. It’s not expected that Stephen Poloz will announce any change to the current rate having already spoken recently about the bank’s assessment of the economic landscape.

18 May

Government Bonds Set To Push Mortgage Rates Higher


Posted by: John Dunford

The sharp rise in Canadian government bonds is likely to push mortgage rates higher in the coming weeks. Five-year bonds have increased by 40 basis points in the past few weeks and with variable rate mortgages tracking the bonds some analysts are advising that consumers should be considering locking in rates now.

13 May

Canada’s Central Bank Likely Won’t Raise Interest Rates


Posted by: John Dunford

Speaking at RealtorQuest, Warren Jestin, the chief economist for ScotiaBank, said Canada’s central bank likely won’t raise interest rates, possibly until the end of next year.

 Jestin pointed to several reasons behind his forecast, each of which he said led to the Bank of Canada’s concern for the economy, which, in turn, is keeping rates low.

 The first concern is the low value of oil. Jestin said Canada’s economy is traditionally dependent on commodities, so the oil shock most certainly impacted the national market.

 Brokers across the country are offering record-low interest rates to clients, and the longer rates stay low, the less brokers will have to buy rates down to compete.

 Jestin also said the low Canadian dollar, which is very closely tied to the energy industry, is also a source of concern for the Bank of Canada. The loonie has since rebounded from a low in the 77-cent range, thanks largely to some recovery in the energy market.

 Employment, too, particularly among first-time buyers, remains low, though not entirely absent.

 “First-time buyers are in the market,” Jestin said, “but they’re not as aggressive as they were.”

 Still, even if the BoC were to increase rates, Jestin said he doesn’t expect that to cause the real estate market to crash.

 “Interest rates are not an impediment to real estate,” he said, echoing the sentiment that many agents have already pointed to.

 In Toronto, agent Justin Kua said people are forced to buy and sell their homes for a variety of reasons and, for that subsection of buyers and sellers, interest rates do not play a role in that decision.

 “When it comes to lifestyle changes, you’re paying one way or another,” he said. “It comes down to your aggression in being able to pay down the mortgage in the first five to 10 years.”

7 May

Mortgages could be part of emergency loan collateral


Posted by: John Dunford

The Bank of Canada announced some proposals that are aimed at protecting the country’s financial system in the event of another financial crisis. The bank’s deputy governor Carolyn Wilkins announced the plans Tuesday which it hopes will reduce the risk to financial institutions and cut taxpayers’ exposure. The BoC wants to ensure that all banks and mortgage lenders have ‘living wills’ to avoid a meltdown and without such plans they would be ineligible for a state bailout. Mortgages may also be accepted as collateral against emergency loans for financial institutions. Ms. Wilkins stated: “We are adjusting the range of collateral we would accept as a last resort for emergency loans. This collateral could include mortgages, which would give a stressed institution more capacity to accept ELA in an emergency. To be clear, this would only occur after all other collateral had been exhausted.”