Latest in Mortgage News: House Price Growth to Cool by End of Year: TD

General Beata Gratton 30 Apr

Latest in Mortgage News: House Price Growth to Cool by End of Year: TD

TD Bank is forecasting that home prices have further to rise yet before finally starting to lose steam by the end of the year.

“…with markets remaining historically tight, more near-term gains are in the cards,” wrote TD economist Rishi Sondhi in a recent report.

But, with home prices already up 31.6% in March on an annual basis, and with sales up 76.2%, Sondhi added that such growth is “unsustainable.”

“Accordingly, we anticipate some cooling in sales starting in the second half of the year, as rising interest rates begin to bite,” he wrote. “This should also sap some steam from price growth.”

In the near-term, watch for some potential “pull forward” of sales as buyers try to get in before a stricter stress test takes effect June 1 for uninsured mortgages (those with a down payment of 20% or more). On the other hand, Rishi notes that the third wave of the pandemic could also weigh on activity.

Filogix Unveils Expert Pro and Expert Plus

Filogix announced recently that it has enhanced its Filogix Expert offering by launching Filogix Expert Pro and Expert Plus.

Expert Pro is largely a rebranding of Doorr, a company Finastra bought in 2020 that provided a client-facing portal, digital signatures, CRM, document management, broker workflow automations, online appointment scheduling, SMS and NOA retrieval.

Together with Expert Plus, both are being promoted as solutions to digitize the end-to-end mortgage process.

“Smaller lenders have been looking for a solution that provides a cost-effective and easy method to receive mortgage applications while at the same time ensuring their broker partners are able to submit an application in an efficient and secure manner,” said Siobhan Byron, SVP, Technology Enabled Managed Services (TEMS) at Finastra.

“Coming this spring, Filogix will bring to market a new solution that fulfills this need.”

The platforms will allow mortgage professionals to “centralize their business through workflow optimization,” Finastra says, adding that for broker-owners, this means improved visibility over brokerage operations, with insight into performance metrics and business analytics.

BCREA Warns Against Unconditional Offers

While housing activity in British Columbia isn’t as super-charged as some markets in Toronto, a “heightened level of activity” has caused provincial regulators to issue a warning to homebuyers.

A statement was released by the Real Estate Council of BC (RECBC) and Office of the Superintendent of Real Estate (OSRE), with the goal of encouraging buyers to do their due diligence when buying a home.

“Buying a home is one of life’s biggest financial decisions. There are potential risks at the best of times, but with the added pressure and stress of the current market conditions, those risks are amplified,” said Micheal Noseworthy, Superintendent of Real Estate. “In a competitive market, it’s more important than ever to do your research and make a well-informed decision.”

Some advice offered included understanding the risk of subject-free offers, being realistic about how much home you can afford, and being prepared for a multiple-bid situation.

“Purchasers who enter into unconditional offers without sufficient committed financing to complete their purchase risk losing their deposit and being sued for damages if they are unable to complete,” Samantha Gale, Chief Executive Officer of BCREA, said.

Majority of Homeowners Plan to Stay Put

Despite many homeowners sitting on newfound wealth in the form of highly valuable home equity, a majority say they have no plans to cash in and sell.

Just 6% of homeowners planned to sell their home pre-pandemic, and 77% say that hasn’t changed, according to a recent poll from CIBC. Additionally, three quarters (75%) say they have no plans to move in the next two years.

“As a potential homebuyer, these results suggest that supply won’t be improving in the near term…” Carissa Lucreziano, Vice-President, CIBC Financial and Investment Advice, said in a release.

But with homes serving as personal sanctuaries amidst the pandemic, a growing number of homeowners have turned their focus to renovating their current properties as opposed to buying new.

More than a third (31%) of homeowners said they carried out some form of renovation during the pandemic, while another 34% said they plan to remodel over the next 12 months.

The CIBC survey also found that half of renters say they are unable to purchase due to high home prices. Nearly half, on the other hand, say their lack of owning a home is not due to the current mortgage stress test.

–Steve Huebl

High Home Prices a Growing Obstacle for First-Time Buyers

General Beata Gratton 21 Apr

High Home Prices a Growing Obstacle for First-Time Buyers

The ongoing surge in home prices across the country is discouraging a large number of young non-homeowners, many of whom say they’re giving up on the dream of homeownership altogether.

More than a third (36%) of non-homeowners under 40 believe they will never own a home, while 62% of Canadians believe a majority of people are being priced out of owning a home for the next decade, according to a recent poll from RBC.

“The road to homeownership isn’t always easy, and the last year has created both challenges and opportunities for homebuyers,” said Amit Sahasrabudhe, Vice-President of Home Equity Financing, Products and Acquisitions at RBC.

The problem is that despite best efforts to save for a down payment, hopeful buyers simply can’t keep pace with today’s price gains.

In March, the average home price was up more than $172,000 compared to a year earlier. That’s a 25% annual gain, working out to more than $14,000 of price appreciation each month.

A majority of Canadians (61%) believe that prices will continue to go up in the immediate future.

That means many aspiring homeowners simply can’t save up money fast enough for their down payment. Non-homeowners who are likely to buy a home in the next two years say they are putting aside $789 a month towards their down payment.

A majority of first-time buyers (84%) are relying on personal savings for their down payment, according to recent data from Mortgage Professionals Canada. Other sources include withdrawals from RRSPs (26%) and relying on gifts from parents or other family members (25%).

Higher Home Prices Resulting in Higher Down Payments

It’s intuitive that the higher the home price, the larger the down payment that is needed.

But now, with average prices surpassing the $500,000 mark, down payment requirements have leapt higher. That’s thanks to a 2015 Department of Finance rule change that requires borrowers to put 10% down for the portion of the purchase price above the half-million-dollar mark. For the amount up to $500,000, the minimum 5% down payment applies.

To put this into perspective, in March the average home price in Canada was $716,828, according to the Canadian Real Estate Association. A flat 5% down payment works out to $35,841. But factoring in the 10% down on the portion above $500k, today’s buyers have to put down a minimum of $46,682, or 6.5% of the purchase price.

Budgets Falling Short of Reality

Nearly half of current non-homeowners (48%) who plan to purchase a home in the next two years say their budget is less than $500,000, well short of national home price of $716,828, according to CREA. Even when the high-priced markets of Toronto and Vancouver are taken out of the equation, the national average is still above the half-million-dollar mark at $556,828.

While 86% of RBC’s survey respondents who plan to buy in the next two years have money saved up, it may not be enough to comfortably put an offer on a house, depending on the market, and have money left over for closing costs.

The average amount saved up is $42,000, according to the survey, although 40% have less than $25,000 set aside for their purchase.

“Building up a down payment can often be the biggest barrier to buying a home, especially as prices continue to climb in the pandemic environment,” Sahasrabudhe added.

Despite the hurdles, as of January more than a quarter of non-owners (27%) said they still plan to buy a home in the coming year, despite rising prices, according to the MPC report cited above.

–Steve Huebl

March Existing Home Sales in Canada Hit New Record High As New Listings Surge To Unprecedented Levels

General Beata Gratton 15 Apr

What is All the Policy Hysteria About?
Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales hit another all-time high in March. What was arguably more noteworthy was that new listings hit their highest level on record in seasonally adjusted terms in March. Prices continued to rise as sales dwarfed the new supply.

The number of homes sold across the country rose 5.2% on a seasonally adjusted basis. The actual (not seasonally adjusted) activity was up 76.2% year-over-year (y-o-y). The 76,259 houses that sold were 14,000 more than the previous monthly sales record set last July. The number of newly listed properties jumped another 7.5% from February to March. Benchmark home prices rose 3.1% from the previous month and were up 20.1% y-o-y.

The month-over-month increase in national sales activity from February to March was broad-based and generally in line with locations where more new listings became available. Sales gains were largest in March in Greater Vancouver, Calgary, Edmonton, Hamilton-Burlington and Ottawa.

“Seeing how many homes were bought and sold in March 2021, one could be forgiven for thinking the market just continues to strengthen, and maybe to some extent it is,” stated Cliff Stevenson, Chair of CREA. “The real issue is not strength in housing markets but imbalance. That demand has been around for months, but with the shortages in supply we have across so much of Canada, a lot of that demand has been pressuring prices. So the big rebound in new supply to start the spring market is the relief valve we need the most to get that demand playing out more on the sales side of things and less on the price side. That said, it will take a lot more than one month of record new listings, but it looks like we may finally be rounding the corner on these extremely unbalanced housing market conditions. It’s great news for frustrated buyers…”

“We spent a lot of time over the last year talking about pent-up demand, but I think now is a good time to talk about pent-up supply, which may be the answer to the question everyone is asking right now,” said Shaun Cathcart, CREA’s Senior Economist. “2020 was the year that home became everything, so in hindsight it’s not that surprising that so many people who did not have one in which to ride out the pandemic really wanted one, while so many of those who did have a home to hunker down in were not inclined to give it up. Then, it stands to reason that as the uncertainty caused and the danger posed by COVID wind down, some owners who would not sell during a global pandemic will emerge with properties for sale. At the same time, some of the urgency on the demand side could dissipate. We’ll only know in the fullness of time, but March certainly did nothing to disprove the idea. That said, the third wave of COVID-19 could throw a wrench into the works of a potential supply recovery this spring”.
New ListingsThe number of newly listed homes climbed a further 7.5% to set a new record in March. With February’s big rebound, new supply is up more than 25% in the last two months.

With the rebound in new supply outpacing recent sales gains, the national sales-to-new listings ratio eased back to 80.5% in March compared to a peak level of 90.9% set in January. The long-term average for the national sales-to-new listings ratio is 54.4%, so it is currently still very high historically. The good news is it appears to be moving in the right direction finally.

Based on a comparison of sales-to-new listings ratio with long-term averages, less than 20% of all local markets were in balanced market territory in March, measured as being within one standard deviation of their long-term average. The other 80%+ of markets were above long-term norms, in many cases well above. The first three months of 2021 and the second half of 2020 have seen record numbers of markets in seller’s market territory. For reference, the pre-COVID record of only around 55% of all markets in seller’s territory was set back at the beginning of 2002.

The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity. There were only 1.7 months of inventory on a national basis at the end of March 2021 – the lowest reading on record for this measure. The long-term average for this measure is a little over five months.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) climbed by 3.1% m-o-m in March 2021 – similar to but slightly less than the record gain in February.

While price growth remains the largest in the single-family home space, the pace of those gains decelerated in March while price gains in the more affordable townhome and apartment segments continued to pick up steam. Of the 41 markets now tracked by the index, all but one were up on a m-o-m basis.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 20.1% on a y-o-y basis in March. Based on data back to 2005, this was a record y-o-y increase, surpassing the previous record of 18.6% set back in April 2017.

The largest y-o-y gains continue to be posted across Ontario, followed by markets in B.C., Quebec and New Brunswick, then by single-digit gains in the Prairie provinces and Newfoundland and Labrador.

The actual (not seasonally adjusted) national average home price was a record $716,828 in March 2021, up 31.6% from the same month last year. That said, it is important note that the biggest increase in new supply and thus sales in March was in Greater Vancouver, which raised that market’s share of national activity to its highest level in almost four years.

Detailed home price data by region is reported in the table below:
Bottom Line

The continued strength in the market comes amid a debate in Canada over whether a housing bubble is building and what policymakers should do about it. Last week, Canada’s banking regulator, OSFI, said it is examining whether to set up a new higher minimum benchmark interest rate of 5.25% to determine whether people qualify for uninsured mortgages, and Prime Minister Justin Trudeau’s government has said it is looking to impose a tax on foreign, non-resident homeowners. Some economists have argued these steps aren’t enough, though March’s increase in supply may ease some of these concerns.

The simplest explanation for why the housing market has been so strong is the dramatic decline in mortgage rates generated by the Bank of Canada’s easing in monetary policy in March 2020 with the onset of the pandemic. The central bank’s policy move did precisely what it was intended to achieve, even though it may now be proving counterproductive. Trying to now halt or temper demand through a myriad of additional complex rules is not only inefficient but also risks unintended consequences.

The dramatic decline in mortgage rates to record low levels boosted the purchasing power of households. Also, many were able to buy further away from expensive cities also easing the burden of home purchases of household expenses. This not only occurred across Canada, but we observed the same phenomenon in many countries around the world. Home price inflation has been greatest the further you go out from city centres.

I agree with Beata Caranci, SVP & Chief Economist of TD Bank when she pointed out that, “Canada already has a number of safety levers in place around household financial risks. In fact, the IMF concluded in January 2020 that Canada’s “macroprudential stance is broadly adequate” and the stance was relatively tight, reflecting the six rounds of tightening mortgage insurance rules by the Department of Finance. Provinces and cities have also enacted measures over the years to discourage speculative activity via taxing vacant properties or upping land transfer taxes.”

Buyers are not irrational when they are concerned about being priced out of a home purchase. For the past thirty years, despite all the hype about housing bubbles in cities like Vancouver and Toronto, residential real estate has been a great investment and far less volatile than alternative uses of funds. This has been boosted by Canada’s immigration policy which has triggered the strongest population growth among the G7 countries. Property taxes and land transfer taxes are already among the highest in the world and, unlike the US, mortgage payments and property taxes are not tax-deductible.

The bulk of the new housing supply has been in multi-unit housing. The pandemic has highlighted the value of a much-coveted single-family home. That has been reflected in the surge in the prices of such homes, which were still affordable in heretofore untapped markets well beyond the major cities. Why shouldn’t today’s dual-income households aspire to the same homeownership dreams their parents fulfilled? Even after this boom in housing, which will no doubt slow as the pandemic ends and interest rates return to more normal levels, delinquency rates on outstanding mortgages will remain low. The guardrails put in place by the series of actions since 2016–reducing amortizations, increasing minimum downpayments, and tightening mortgage stress testing requirements–all but guarantee that in the strong economic recovery from the pandemic, credit risks are already sufficiently low.

-Dr. Sherry Cooper

Blowout Canadian Job Growth Continued In March

General Beata Gratton 12 Apr

Blockbuster Canadian Jobs Report for March.

 Blowout Canadian Job Growth Continued In March
This morning, Statistics Canada released the March 2021 Labour Force Survey showing much stronger-than-expected job growth for the second month in a row, pointing towards a Q1 growth rate of more than 5.5%. This survey reflected labour market conditions during the week of March 14 to 20, when public health restrictions were less restrictive in several provinces than during the prior month.

Employment surged by a whopping 303,100 in March after a gain of 259,200 in February. The jobless rate fell to 7.5%, the lowest since before the pandemic. However, there remain many discouraged workers who are no longer actively looking for jobs but would prefer to be gainfully employed. Many of them might well be mothers who could not afford or find quality daycare or needed to help children with remote learning.

The employment rate–the percentage of the population aged 15 and older that is employed—increased 0.9 percentage points to 60.3%, which was still 1.5 percentage points below the rate seen in February 2020.

 

Employment gains in March were spread across most provinces, with the largest increases in Ontario, Alberta, British Columbia and Quebec. Much of the employment increase reflected a continued recovery in industries—including retail trade and accommodation and food services—where employment had fallen in January in response to public health restrictions. Growth in health care and social assistance, educational services, and construction also contributed to the national increase in March.

The COVID-19 pandemic continues to impact the labour market. Compared with February 2020, there were 296,000 (-1.5%) fewer people employed in March 2021 and 247,000 (+30.4%) more people working less than half of their usual hours. The number of workers affected by the COVID-19 economic shutdown peaked at 5.5 million in April 2020, including a drop in employment of 3.0 million and an increase in COVID-related absences from work of 2.5 million.

 

Among workers who worked at least half their usual hours in March, the number working at locations other than home increased by about 600,000 for the second consecutive month as public health restrictions eased across the country.

While the number of Canadians working from home declined by 200,000 in March, working from home remains an important adaptation to the COVID-19 pandemic. Of the 5.0 million Canadians working from home in March, more than half (2.9 million) were doing so temporarily in response to COVID-19.

Total hours worked rose 2.0% in March, driven by gains in several industries, including educational services, retail trade, and construction. Building on a steady upward trend since April 2020, this brought total hours to within 1.2% of February 2020 levels. Hours worked among the self-employed continued to be much further behind (-7.7%) February 2020 levels, while hours among employees returned to pre-pandemic levels.

The unemployment rate falls to the lowest level since the start of the pandemic

The unemployment rate declined for the second consecutive month, falling 0.7 percentage points to 7.5% in March, the lowest since February 2020. This reflected strong employment growth that exceeded the number of people entering the labour market.

The number of people unemployed fell 148,000 (-8.9%) in March, with the majority (59.0%) of people leaving unemployment becoming employed. Despite sharp reductions in both February and March, the number of people unemployed stood at 1.5 million, up 371,000 (+32.4%) compared with February 2020.

The number of long-term unemployed—people who had been looking for work or on temporary layoff for 27 weeks or more—held steady in March. There were 286,000 (+159.5%) more people in long-term unemployment compared with February 2020. These are the folks that could be permanently scarred by the pandemic and for whom job training may well be helpful.

 

Bottom Line 

While Friday’s jobs report surprised on the upside, there are still concerns around an uneven recovery and the impact of the third-wave shutdown in the economy. As the virus becomes more contagious and lethal, the economic recovery remains at risk, heightened by the vaccine’s very slow rollout. The reduces the importance of this employment report for the Bank of Canada even though it is the last report before the central bank’s April policy decision. No doubt the Bank of Canada will highlight the rising risk of contagion on the economic recovery.

Prime Minister Justin Trudeau’s government will release its 2021 budget on April 19 and has already promised an additional spending dose. The Bank of Canada’s next policy decision is on April 21. The Bank will thus maintain the overnight rate at 25 basis points and refrain from tapering quantitative easing.

-Dr.Sherry Cooper

Homebuyers to Face More Stringent Mortgage Stress Test After June 1

General Beata Gratton 12 Apr

Homebuyers to Face More Stringent Mortgage Stress Test After June 1

Canada’s banking regulator has proposed changes that would strengthen the stress test applied to uninsured mortgages.

The Office of the Superintendent of Financial Institutions (OSFI) unveiled its proposed changes on Thursday, which would require borrowers applying for uninsured mortgages—typically those with more than a 20% down payment—to qualify at their mortgage contract rate plus two percentage points or 5.25%, whichever is higher.

The stress test currently has a minimum qualifying rate of 4.79%, nearly 50 basis points lower.

Additionally, OSFI said it plans to “revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate for the risks in the environment.”

OSFI Superintendent Jeremy Rudin said the higher floor rate is based on an average of the qualifying rate in the preceding 12 months leading up to the pandemic, adding that financial markets must be prepared for a return to pre-pandemic conditions—i.e., higher interest rates.

“The main thing we have to be ready for is an increase in mortgage rates to the pre-pandemic range,” he told reporters. “We have interest rates that are extraordinarily low, even by recent standards.”

He added that the regulator is concerned about market conditions, which elicited this warning to lenders in OSFI’s statement: “OSFI will be looking for heightened vigilance from FRFI lenders in applying the principles of Guideline B-20 related to collateral management, income verification and debt servicing, combined Mortgage-HELOC loan plans and risk governance.”

“Rather than waiting to see any kind of deterioration in underwriting practices, we’re proactively out there reminding lenders that even in these conditions, the principles that we elucidated in B-20 are very important and that we’re going to be looking closely to see that they’re being respected,” Rudin said.

Reaction to the Proposed Changes

Reaction to OSFI’s announcement was swift, with some saying the increased minimum stress test went too far, while others said it didn’t go far enough.

“Increasing the qualifying rate by another almost 50 basis points will only serve to disqualify more aspiring middle-class Canadians and would-be first-time buyers,” Paul Taylor, President and CEO of Mortgage Professionals Canada told CMT. “While 46 basis points isn’t a tremendous difference, philosophically, we’re continuing with a structure that exacerbates the wealth gap and makes it even more difficult for those without a bank of mom and dad to rely upon to own a home.”

It’s estimated that this proposal would reduce purchasing power for uninsured borrowers by between 4% and 4.5%.

“The maximum amount that can be borrowed under the new rule would decrease by 4.5% (from $442K to $422K for a median-income household),” National Bank economists wrote. In comparison, they noted that the B-20 stress test implemented in January 2019 requiring homebuyers to qualify at the higher of either the 5-year posted rate or the contractual rate plus 200 basis points reduced purchasing power by 22%.

“Though the new measure is a step in the right direction for financial stability, we doubt this alone will significantly cool the housing market,” they wrote.

Still, some see the increase in the stress test’s floor rate as overreach, considering it is already about 300 basis points above some of the lowest uninsured mortgage rates still available today (and even more so for variable rates).

“I am struggling to see how this can be justified as a prudential regulatory measure. Prior to today, the hurdle rate used in the stress test was already far in excess of any credible scenarios for future market interest rates,” Will Dunning, MPC’s Chief Economist told CMT.

“As I commented recently, official data from the Bank of Canada shows that the highest actual average lending rate seen since the start of 2013 is 3.76%. This seems to me to be a reasonable interest rate to use in pursuit of prudent regulation.”

Dunning added that the stress test fails to take into consideration two key factors that will reduce the impacts of higher rates at the time of future mortgage renewals: “Repayment of mortgage principal will be more rapid than is implicitly assumed by the stress tests; secondly, borrowers will experience income growth.”

There’s no word yet if changes to the insured mortgage stress test will be forthcoming as well. But the Minister of Finance, who oversees the stress test applied to insured mortgages, said this: “We will continue to monitor housing market conditions across the country. To inform potential steps the government may take, we will closely examine the results of the consultation announced by the Superintendent of Financial Institutions.”

The public is invited to provide feedback to OSFI via B.20@osfi-bsif.gc.ca, which will be accepted up to May 7, 2021. OSFI will then communicate some of that feedback and any final amendments to the qualifying rate by May 24, 2021, prior to the new stress test taking effect on June 1, 2021.

–Steve Huebl

OSFI Considers Setting a Minimum Qualifying Rate of 5.25% For Uninsured Mortgages

General Beata Gratton 8 Apr

OSFI Considers Setting a Minimum Qualifying Rate of 5.25% For Uninsured Mortgages

Banking Regulator Aims To Make It Tougher To Get An Uninsured Mortgage

 

With several Big-Five bank CEOs calling for regulatory action to slow the red-hot housing market, it didn’t take long for the Office of the Superintendent of Financial Institutions (OSFI), the governor of federally regulated financial institutions, to respond. In a news release issued today, OSFI proposed an increase in uninsured mortgages’ qualifying rate to the higher of the mortgage contract rate plus 200 basis points or 5.25% as a minimum floor.

Based on posted rates of the country’s six largest lenders, the current threshold is at 4.79%. Before the pandemic, the posted rate was widely considered too high relative to much lower contract rates. Remember, Canada’s six largest lenders under OSFI’s jurisdiction set the posted rate each week when they submit to the Bank of Canada the so-called ‘conventional 5-year mortgage rate’. It has increasingly born little relationship to actual contract rates.

OSFI, once again, shows itself to cozy up to the Canadian banking oligopoly. Keep in mind that delinquency rates on the Canadian banks’ mortgage books are very low–both in historical terms and compared with financial institutions in the rest of the world. OSFI couched this proposal in terms of “the importance of sound mortgage underwriting.”

In the release, OSFI said, “The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of a change in circumstances, such as the reduction of income or a rise in mortgage interest rates. As mortgages are one of the largest exposures that most banks carry, ensuring that borrowers can repay their loans strongly contributes to the continued safety and soundness of Canada’s financial system.”

The comment period ends on May 7. OSFI reported that they would communicate the revised B-20 Guideline by May 24, with an implementation date of June 1, 2021.

This all but ensures that the current boom in home buying will accelerate further in the spring market–providing an impetus for borrowers to get in under the June 1 deadline. OSFI’s move will trigger an even hotter spring housing market as demand is pulled forward just as it was before the January 1, 2018 implementation date of the current B-20 ruling.

This will not impact non-federally regulated FI’s such as credit unions, mono-lines and private lenders, nor does it immediately impact insured-mortgage borrowers.

The federal government is in charge of mortgage qualification for insured mortgages. CMHC and the finance department could well follow OSFI’s lead in tightening qualifying rules for insured loans.

Bottom Line

It is noteworthy to remember that on January 24, 2020, OSFI indicated that it was reviewing the benchmark rate (or floor) used for qualifying uninsured mortgages. At that time, the thought was that the widening gap between the posted rate and the contract mortgage rate was too large and that OSFI and the Bank of Canada would publish a mortgage rate weekly that would better reflect the contract rates. The new qualifying rate would be that contract mortgage rate plus 200 basis points. This consultation was suspended on March 13, 2020, in response to challenges posed by the COVID-19 pandemic.

-Dr. Sherry Cooper

The Latest in Mortgage News: OSFI to Re-launch Review of the Uninsured Stress Test

General Beata Gratton 8 Apr

The Latest in Mortgage News: OSFI to Re-launch Review of the Uninsured Stress Test

Canada’s bank regulator has announced it will restart a review of the stress test rate on uninsured mortgages.

The Office of the Superintendent of Financial Institutions (OSFI) said it will “resume its policy work on the minimum qualifying rate for uninsured mortgages by issuing a new consultation [Thursday] at noon (ET).”

Uninsured mortgages (generally those with more than a 20% down payment) are currently stress-tested on the higher of the borrower’s contract rate plus 200 bps, or the benchmark rate, which is currently 4.79%. Based on today’s rates, that means most uninsured borrowers are being stress-tested at 4.79%.

OSFI had initially started a review of the stress test in January 2020, but postponed the process as its priority shifted to dealing with the effects of the pandemic.

At the time, OSFI said the new formula for the qualifying rate would be “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.”

While the stress test rate has been criticized for being unreasonably high compared to today’s contract mortgage rates, that hasn’t stopped the red-hot real estate market that’s taking place across the country.

Toronto Home Sales Up 97% in March; Prices Post Double-Digit Gains

March marked the third consecutive month of record home sales in the Greater Toronto Area and another month of double-digit price gains.

The GTA saw a near doubling of home sales in March from the previous year (97%) to 15,652 sales, according to new data from the Toronto Regional Real Estate Board (TRREB). Meanwhile, the MLS Home Price Index Composite Benchmark rose 16.5% to an average selling price of $1,097,565.

With demand exceeding the current housing supply, TRREB said double-digit price gains can be expected to continue.

“With sales growth outstripping listings growth by a large margin, including in the condo market segment, competition between buyers in some market segments and the potential for double–digit price growth could continue without a meaningful increase in the supply of homes available for sale,” TRREB Chief Market Analyst Jason Mercer said in a release. “This will become more apparent as population growth resumes over the next year.”

Meanwhile, here are the March results from the Real Estate Board of Greater Vancouver:

  • Home Sales: 5,708 (+126% year-over-year)
  • Benchmark price (all home types): $1,123,300 (+9.4%)
  • Benchmark price (detached home): $1,700,200 (+17.9%)
  • Benchmark price (apartment home): $715,800 (+3.7%)

BluMortgage CRM Integrates with Velocity and Filogix Expert

A Canadian provider of consumer relationship management software (CRM) has announced a new partnership that will see its systems integrated with both Velocity and Filogix Expert.

BluMortgage, which provides a CRM tool specifically built for mortgage professionals, said this integration with two of the industry’s key deal origination systems will further enhance pipeline management for brokers and provide a more seamless transfer of data.

“We believe that how you manage your clients should be independent from how you submit deals to the lender,” said Tom Hall, co-founder of BluMortgage. “With these integrations, along with our existing integration with Lendesk, BluMortgage CRM is a truly agnostic solution to whatever tools and processes a broker is already using.”

Hall says the BluMortgage CRM tool provides powerful analytic capabilities while enabling custom sales and marketing options.

–Steve Huebl