Bank of Canada lowers overnight rate to ¼ percent

With the Bank of Canada dropping its overnight rate again in response to the COVID-19 pandemic, it would seem to be a great time to shop for a new mortgage or mortgage refinancing. This is not the case however as advertised interest rates for new mortgage applications climbed significantly last week.

  • Rate Announcement: 50 basis point emergency cut by Bank of Canada
  • Overnight rate: Now 0.25%
  • Prime Rate: Currently 2.95%; pending change to potentially 2.45%

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.

The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices. The pandemic-driven contraction has prompted decisive fiscal policy action in Canada to support individuals and businesses and to minimize any permanent damage to the structure of the economy.

The Bank is playing an important complementary role in this effort. Its interest rate-setting cushions the impact of the shocks by easing the cost of borrowing. Its efforts to maintain the functioning of the financial system are helping keep credit available to people and companies. The intent of our decision today is to support the financial system in its central role of providing credit in the economy and to lay the foundation for the economy’s return to normalcy.

The Bank’s efforts have been primarily focused on ensuring the availability of credit by providing liquidity to help markets continue to function.  To promote credit availability, the Bank has expanded its various term repo facilities. To preserve market function, the Bank is conducting the Government of Canada bond buybacks and switches, purchases of Canada Mortgage Bonds and banker’s acceptances, and purchases of provincial money market instruments. All these additional measures have been detailed on the Bank’s website and will be extended or augmented as needed.

Today, the Bank is launching two new programs.

First, the Commercial Paper Purchase Program (CPPP) will help to alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses. Details of the program will be available on the Bank’s web site.

Second, to address strains in the Government of Canada debt market and to enhance the effectiveness of all other actions taken so far, the Bank will begin acquiring the Government of Canada securities in the secondary market. Purchases will begin with a minimum of $5 billion per week, across the yield curve. The program will be adjusted as conditions warrant but will continue until the economic recovery is well underway. The Bank’s balance sheet will expand as a result of these purchases.

The Bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities, and will update its outlook in mid-April. As the situation evolves, the Governing Council stands ready to take further action as required to support the Canadian economy and financial system and to keep inflation on target.

The next scheduled date for announcing the overnight rate target is April 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

Source: Bank of Canada

New Changes to the Mortgage Stress Test

Minister Morneau announces a new benchmark rate for qualifying insured mortgages

February 18, 2020 – Ottawa, Ontario – Department of Finance Canada

For many Canadians, their home is the most important investment they will make in their lifetime. That is why the Government of Canada has introduced measures to help more Canadians achieve their housing needs while also taking measured actions to contain risks in the housing market. A stable and healthy housing market is part of a strong economy, which is vital to building and supporting a strong middle class.

Today, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the minimum qualifying rate for insured mortgages, also known as the “stress test.” These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.

This follows a recent review by federal financial agencies which concluded that the minimum qualifying rate should be more dynamic to better reflect the evolution of market conditions. Overall, the review concluded that mortgage standards are working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses. This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions.

The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages. OSFI is seeking input from interested stakeholders on this proposal before March 17, 2020.

Quotes

“For many middle class Canadians, their home is the most important investment they will make in their lifetime. Our government has a responsibility to ensure that investment is protected and to support a stable housing market. The government will continue to monitor the housing market and make changes as appropriate. Reviewing the stress test ensures it is responsive to market conditions.”

Bill Morneau, Minister of Finance

Quick facts

  • When a borrower has less than a 20% down payment, lenders are required to obtain government-backed mortgage insurance. The mortgages must comply with the insured mortgage rules set by the Minister of Finance, including the insured minimum qualifying rate.
  • When the borrower has a down payment of 20%, or more, of the sale price, insurance is not required. The minimum qualifying rate for uninsured mortgages is set by OSFI, the independent banking regulator.
  • To help more Canadians access affordable housing that meets their needs, the Government of Canada launched the National Housing Strategy—a 10-year, $55+ billion plan that will build 125,000 new affordable housing units, repair 300,000 others, and reduce chronic homelessness by 50%.
  • In Budget 2019, the federal government took concrete steps to make homeownership more affordable for first-time buyers by implementing a First-Time Home Buyer Incentive and increasing the Registered Retirement Savings Plan withdrawal limit to $35,000 to buy a home.Source: Government of Canada Department of Finance

Cost of Living Index shows how expensive is it to live in Toronto in 2020

Today, financial rate comparison site LowestRates.ca released its 2020 Cost of Living Index, an annual report produced by the company which outlines how much it costs to live in Toronto.

The index calculates transportation and housing spending for a number of different living circumstances. These include homeowners who commute versus homeowners who drive, as well as renters who drive versus those who commute. It also factors in spending on food, phone and internet, entertainment, health and fitness. The estimated costs in the index are tailored to employed people without dependents.

“It’s common knowledge that Toronto is a very expensive city to live in,” says Justin Thouin, Co-Founder and CEO of LowestRates.ca. “With this index, we crunched the numbers to actually determine what kind of salary the average individual in a number of different circumstances needs to earn to afford to live in Toronto.”

The results of the report determined that while living in Toronto:

  • Renters who take public transit will spend $3,541.24/month, or $42,494.88 annually
  • Renters who drive will spend $3,840.23/month, or $46,082.76 annually
  • Homeowners who take public transit will spend $5,415.73/month, or $64,988.76 annually
  • Homeowners who drive will spend $5,714.72/month, or $68,576.64 annually

Based on the current tax rates in Canada and Ontario, in order to get by in Toronto:

  • Renters who take public transit will need to earn $55,500 before tax ($42,584 after tax)
  • Renters who drive will need to earn $61,000 before tax ($46,376 after tax)
  • Homeowners who take public transit will need to earn $88,000 before tax ($65,056 after tax)
  • Homeowners who drive will need to earn $94,000 before tax ($68,971 after tax)

These figures are meant to serve as guideposts. It’s possible to live in Toronto on less than this, especially with a partner or roommates. It’s also important to keep in mind that there are other costs not accounted for in this index which could make living in Toronto more expensive.

“This cost breakdown doesn’t include things like debt repayments, the cost of pet ownership, clothes, haircuts or other one-time fees associated with moving to a new city,” says Thouin. “It’s clear that the high cost of living in this city should be of serious consideration to any person thinking about moving to Toronto.”

Some highlights from the report show that the average Torontonian can expect to budget the following amounts for key expenditures:

Homeowner housing costs average $4,223.56/month
Renter housing costs average $2,349.07/month
Public transit costs average $258.55/month
Driver costs average $557.54/month
Food costs average $533.95/month
Cell Phone and Internet costs average $155.96/month
Entertainment costs average $178.96/month
Health and fitness costs average $64.75/month

Homeowner housing costs: $4,223.56/month

The average selling price for homes in Toronto in 2019 was $883,520. Assuming a down payment of 15%, and including mortgage insurance, that would equal a total mortgage of $772,020. With a 25-year amortization period and a 5-year fixed-rate term at an interest rate of 2.94%, mortgage payments for such a home in Toronto would cost $3,630. Furthermore, for a four-storey detached home in Toronto’s Bloorcourt Village, home insurance would cost $140.92. For this Bloorcourt home, the property tax would cost around $452.64 monthly. In total, monthly housing for the average Toronto homeowner costs $4,223.56.

Renter housing costs: 2019: $2,349.07/month

The average cost of a one-bedroom rental unit in Toronto was $2,314 per month as of November 2019. Most landlords now require renters to purchase tenant insurance, and insurance for a one-bedroom unit in Toronto’s Bloorcourt neighbourhood would cost $35.07 per month. In total, the monthly housing costs for Toronto renters in 2020, including tenant insurance, comes to $2,349.07—up $269.32 from 2019.

Public Transit costs: $258.55/month

Compared to 2019 fare options, Toronto Transit Commission (TTC) prices are higher across the board in 2020, with a 12-month adult Presto Pass costing $138.55 per month. The raised prices for fares can be attributed to the full implementation of the Presto system across the TTC. For those who rely on ridesharing services, there are many options to choose from in Toronto. Whether using taxis, Uber or Lyft, this method of transportation is extremely popular in the city—according to Statistics Canada, Torontonians aged 18 and overspent a collective $241 million on ridesharing services in 2016. A Torontonian who buys a 12-month adult Presto Pass, in addition to taking four $30 Uber trips per month, would spend a total of $258.55 a month in transportation costs.

Driver costs: $557.54/month

The top-selling car in Toronto in 2019 was the Honda Civic Sedan. A 2020 four-door Honda Civic Sedan EX costs around $25,290, and on a seven-year 0%  finance plan with no money down, that would mean monthly payments of $340.21. Since auto insurance is mandatory in Canada, LowestRates.ca used its auto insurance quoter to run a test quote on a 30-year-old male with a clean driving record and G license, living in downtown Toronto, looking for comprehensive and collision coverage. The lowest rate he could get using the quoter with a Honda Civic EX was $217.33 per month. In addition to the cost of the car itself, Toronto drivers must also consider the following costs not included in the monthly cost for drivers in the index: license sticker renewal, parking permits, maintenance and gas.

Food costs: $533.95/month

People today are increasingly relying on food delivery apps such as Skip the Dishes and Uber Eats, which has caused grocery costs to decrease for people in Toronto. The average Torontonian spends $251.95 a month on groceries. In addition to paying for groceries, LowestRates.ca estimates that Torontonians spend approximately $282.00 monthly on dining out and ordering takeout, for a combined monthly food total of $533.95.

Cell Phone and Internet Costs: $155.96/month
Entertainment costs: $178.96/month
Health and fitness costs: $64.75/month

The most common cell phone plan currently available from Bell, Rogers and Telus is 10GB of data at maximum speed. Each major provider charges $75 per month for this type of plan. Excluding one-time installation fees, LowestRates.ca calculated the average monthly cost of home internet to be $80.96. Overall, Torontonians are spending an average of $155.96 per month on cell phones and home internet.

To determine how much people in Toronto are spending on entertainment, LowestRates.ca combined the monthly prices of three popular streaming services, the price of a popular music subscription, the estimated monthly cost of miscellaneous outings, and the costs of going out for drinks or entertaining at home or having drinks at a friend’s house. The combined monthly cost of such entertainment adds up to $178.96 per month.

Health and fitness costs in Toronto vary greatly depending on the discipline or program. Gym memberships range from $15 to $69.98 per month. For a year-long commitment to one of the city’s more popular yoga or pilates studios, Torontonians can expect to pay $115 per month. On average, fitness memberships in Toronto cost $64.75.

About LowestRates.ca

LowestRates.ca is an online rate comparison site for insurance, mortgages, loans and credit card rates in Canada. The free, independent service connects consumers directly with financial institutions and providers from all over North America to offer Canadians a comprehensive list of rates. LowestRates.ca’s mission is to help Canadians become more financially literate, with the near-term goal of saving them $1 billion in interest and fees.

SOURCE LowestRates.ca

CIBC poll finds most Canadians value personal advice over a search engine

Despite technology making it easier than ever to access information, a recent CIBC poll shows that when it comes to major life events, such as getting married, buying a home, or finding a job, many respondents (63 per cent) prefer to ask their friends and family for advice. This is most prevalent amongst younger Canadians, with 78 per cent of those aged 18-34 leaning on people close to them when making important decisions.

When it comes to financial advice, 46 per cent of Canadians prefer to ask an advisor through their financial institution and 36 per cent turn to family and friends. Only 20 per cent of respondents prefer to go online.

“The internet may be a portal to vast amounts of information, but big decisions are personal. When there are choices in front of you, whether it’s career moves or retirement planning, Canadians value the word of a person they trust,” said Kathleen Woodard, Senior Vice President, CIBC Personal and Small Business Banking. “Similar to a family member or a close friend, a financial advisor takes on a role where they understand your needs, treat your goals as their own and provide advice to make your ambitions a reality.”

Those who rely on a financial advisor seem to have greater confidence and knowledge about their money matters. Top reasons include feeling an advisor delivers the best financial advice (50 per cent), more comfortable making financial decisions with the help of an expert (49 per cent) and a better understanding of how investments fit into overall financial health (35 per cent).

Additionally, Canadians who experienced key life events in the past year feel their advisor provided sound advice when they made large purchases (53 per cent), paid off or consolidated debt  (57 per cent), embarked on retirement planning (50 per cent) and conducted wills and estate planning (50 per cent).

The survey also found that most Canadians don’t turn to the web for money management or financial information. More than three-quarters say they have never used an online service that manages investments (robo-advisor), with 20 per cent unaware of these services altogether. Many (65 per cent) claim they do not use online search engines for questions about common financial products or matters.

Key poll findings:

  • Many Canadians (63 per cent) turn to friends and family for advice on major life events, with those aged 18-34 ranking this the highest at 78 per cent, followed by 64 per cent aged 35-54 and 52 per cent of those over 55
  • Most respondents would rather speak to another person versus relying on information from the web alone when seeking financial advice (70 per cent), making restaurant or travel plans (66 per cent) and when signing up for a product or service online (60 per cent)
  • While 46 per cent of Canadians turn to a financial advisor for money related matters, 57 per cent of those aged 18-34 say they turn to friends and family for help in this area
  • More than 65 per cent of respondents say they do not use online search engines when they have questions about common financial products or matters, including GICs, mutual funds, RRSPs, TFSAs, real estate and retirement planning
  • Canadians are most likely to seek financial advice for the following events: when planning for retirement (40 per cent); general investment planning (30 per cent); wills or estate planning (27 per cent); and planning for a home purchase (26 per cent)

About CIBC

CIBC is a leading Canadian-based global financial institution with 10 million personal banking, business, public sector and institutional clients. Across Personal and Small Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at  www.cibc.com/en/about-cibc/media-centre.html .

Disclaimer:

From December 13th to December 17th, 2019 an online survey of 3,033 randomly selected Canadian adults who are Maru Voice Canada panellists was executed by Maru/Blue . For comparison purposes, a probability sample of this size has an estimated margin of error (which measures sampling variability) of +/- 1.6%, 19 times out of 20. The results have been weighted by education, age, gender and region (and in Quebec, language) to match the population, according to Census data. This is to ensure the sample is representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.

SOURCE CIBC

Desjardins acquires mortgage portfolio from La Capitale

Desjardins Group announced today that it is acquiring the mortgage portfolio of La Capitale. The transaction, which will see 6,376 mortgages transferred to Desjardins, will close on February 1st. 2020.

“I’m proud of this acquisition, which solidifies Desjardins’s position as a leader in the residential mortgage market,” said Guy Cormier, President and CEO of Desjardins Group. “It’s a high-quality portfolio from La Capitale that fits perfectly with Desjardins’s expansion objectives, which include seeking out acquisitions to maximize synergies within our organization. We’ll continue to pursue attractive growth opportunities in our primary markets.”

La Capitale mortgage holders can expect to receive a letter after February 3 notifying them of the transfer and welcoming them to Desjardins. They won’t need to do anything: their loans will be transferred automatically and their financing conditions will remain the same.

Desjardins always strives to do what’s best for its members and clients. The financial cooperative is committed to delivering an excellent customer experience and will provide personalized support to new members and clients. A dedicated support centre will open on February 3 to answer mortgage holders’ questions. They can call 1-844-875-3102 or visit www.desjardins.com/transfer for more details.

About Desjardins Group

Desjardins Group is the leading cooperative financial group in Canada and the fifth largest cooperative financial group in the world, with assets of $312.7 billion. It has been rated as one of Canada’s Top 100 Employers by Mediacorp. To meet the diverse needs of its members and clients, Desjardins offers a full range of products and services to individuals and businesses through its extensive distribution network, online platforms and subsidiaries across Canada. Ranked among the world’s strongest banks according to The Banker magazine, Desjardins has some of the highest capital ratios and credit ratings in the industry.

SOURCE Desjardins Group

Two Thirds of Mortgage Shoppers Would Sacrifice Traditional Mortgage Advice for a Lower Rate

While 72 percent of Canadian mortgage shoppers get mortgage advice in person, a majority would opt for a fully online mortgage to save money, according to a new survey by Rates.ca.

Almost one in five mortgage shoppers say they’d be “happy to get a mortgage without talking to people on the phone or in person.” But, an additional 45 percent would consider it, if it meant getting a lower interest rate. For this 45 percent, the rate savings would have to be at least 0.05 to 0.20 percentage points to sway them away from lenders who employ in-person or phone advisors. (A rate that’s 0.20 percentage points lower saves you about $195 a year per $100,000 of the mortgage.)

“Just as we saw with online stock brokerages a few decades ago, a growing segment of borrowers is willing to make their own mortgage decisions online without a banker’s advice,” said Rob McLister, Mortgage Editor at Rates.ca.

Canadian mortgage shoppers also care less about a lender’s brand name when a great rate is at stake. Fewer than one-quarter (23 percent) say the lender brand is important when shopping for a mortgage.

For most mortgage shoppers, getting the best rate surpasses all other considerations by a large margin. Three out of four (75 percent) say getting a low rate is an important factor when choosing a mortgage, with 47 percent of respondents citing it as their number one mortgage goal.

Interestingly, only 19 percent said the lowest overall borrowing cost is their main goal, followed by 14 percent citing clear communication of mortgage terms and conditions.

“The lowest total borrowing cost, which includes interest, fees and penalties, always matters more than the lowest rate,” said McLister. “But people continue to mistakenly associate the lowest rate with the greatest savings.”

Rates.ca recommends a four-step method to minimize borrowing costs:

1)

Research and get advice on the optimal mortgage term given your specific five-year plan

2)

Compare the lowest rates for that term on a rate comparison website (pay attention to the fine print in the rate details)

3)

Call the lender or mortgage broker advertising the rate and ask them to outline all significant restrictions and features of the rate (including things like the prepayment penalty calculation method, the time you’re given to port the mortgage to a new property and whether you can borrow more money before maturity with no penalty).

4)

Pick the best overall value based on this research.

For more on the survey findings, visit Rates.ca.

About the survey
The Rates.ca survey was conducted by Leger Marketing, which surveyed 1,526 Canadians. Approximately 41% (633 respondents) were mortgage shoppers, defined as those who either have a mortgage or are planning to get a mortgage in the next six months. The findings above reflect the opinions of mortgage shoppers only. This online survey was commissioned by Rates.ca and completed between December 13 and 16, 2019. The sample is weighted by age, gender, income and is represented by region. The margin of error for this study was +/-3.9%, 19 times out of 20.

About Rates.ca
Rates.ca is Canada’s one-stop-shop for the best rates on insurance and money products. Rates.ca publishes rates from 30+ insurance providers so that shoppers can find the best rates for themselves. Use the site to find the best rates for auto, home and travel insurance, mortgages, and credit cards. Headquartered in Toronto, Ontario, Rates.ca is located at 360 Adelaide Street West, Suite 100, Toronto, ON, M5V 1R

SOURCE Rates.ca

https://rates.ca/

Making Housing More Affordable for Residents of London

Thanks to investments made by the Government of Canada and the City of London, residents of London will soon have access to more safe and affordable places to call home.

Today, The Honourable Ahmed Hussen, Minister of Families, Children and Social Development and the Minister responsible for Canada Mortgage and Housing Corporation (CMHC) announced that the federal government is investing just over $130 million for the construction of two multi-residential buildings comprising of 420 units, located at 495 Talbot St and 110 Fullarton St in London.

This project, developed by Old Oak Properties Inc., is receiving funding through CMHC’s Rental Construction Financing initiative (RCFi), a National Housing Strategy program delivered by CMHC that supports rental housing construction projects to encourage a stable supply of rental housing for middle-class families struggling in expensive housing markets across the country.

Of these new units, 110 units (26%) have rents lower than 30% of median household income in London. Furthermore, 84 of these units will have rents that fall at or below 70% of the 30% median income in the area, and provide affordable housing options close to public transit and services for modest and middle-income individuals and families.

Quotes

“Through the National Housing Strategy, our Government is increasing the number of rental units for Canadians. These investments also create good jobs and grow the local economy.  They are making a big difference in building a more sustainable future through more energy-efficient and affordable homes. Today’s investment is wonderful news for residents of London, who will soon have new safe and affordable rental housing units.”  The Honourable Ahmed HussenMinister of Families, Children and Social Development and the Minister responsible for Canada Mortgage and Housing Corporation (CMHC)

“There is likely no issue more pressing, no issue more important in London right now than that of affordable housing. Nearly 5,000 Londoners are on the waitlist as demand continues to rise. We are committed to solving this challenge, but no municipality can do it alone. That is why partnerships such as this mean so much. The commitment shown by the federal government and Old Oak Properties Inc. is significant and worthy of substantial recognition. This will make a meaningful difference in the lives of a great many Londoners for years to come.” – Ed Holder, Mayor, City of London

“Old Oak is grateful that Canada Mortgage and Housing Corporation is providing a loan for this exciting new project. Named Centro, this will be a landmark development for both London and Old Oak. Standing at 40 stories and 129 meters, the Centro tower will be the tallest building between Mississauga and Calgary providing hundreds of high-end, affordable rentals.” – Jeff Martin, Chief Financial Officer, Old Oak Properties Inc.

Quick Facts

  • Of the total units, 15% will be adaptable or meeting universal design standards.
  • This project is designed to achieve a reduction in energy use of 25.2% and in greenhouse gases of 38.5% relative to the 2015 NECB.
  • The RCFi, a National Housing Strategy (NHS) initiative delivered by CMHC, supports affordable rental housing construction projects to encourage a stable supply of affordable rental housing across the country for middle-class households struggling in expensive housing markets.
  • Launched in April 2017, the RCFi has generated a lot of interest and a high number of quality applications. This is why, through Budget 2018, the Government increased the number of low-cost loans provided by this initiative from $2.5 billion to $3.75 billion and further increased to $13.75 billion with budget 2019. In total, the RCFi will encourage the construction of 42,500 new rental housing units across Canada.
  • Low-cost loans are available to borrowers who want to build affordable rental housing in Canada in response to demonstrated community need.
  • The rental market is an important housing option for approximately 30% of Canadians.
  • This project represents a major new supply of purpose-built rental housing in London were vacancy rates in 2018 were 1.4%.
  • Under the Investing in Canada plan, the Government of Canada is investing more than $180 billion over 12 years in public transit projects, green infrastructure, social infrastructure, trade and transportation routes, and Canada’s rural and northern communities.

Associated Links

  • As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers unbiased housing research and advice to all levels of the Canadian government, consumers and the housing industry. For more information, visit our website or follow us on TwitterYouTubeLinkedInInstagram and Facebook.
  • To find out more about the National Housing Strategy, visit www.placetocallhome.ca.

SOURCE Canada Mortgage and Housing Corporation

Canadians Have Growing Concerns Over Mortgage Qualification

For many Canadians, buying a home can be a challenging and stressful experience. According to a recent survey from Zillow and Ipsos, 92% of Canadians see at least one barrier to homeownership, and two of the top concerns are related to the mortgage process.

Canadians report feeling pressured by stricter mortgage regulations that went into effect in 2018 and Zillow’s recent survey found that 56% of Canadians see qualifying for a mortgage as a barrier to homeownership, a six-point increase from 2018. This concern rises to 64% for consumers who recently purchased a home, likely linked to the mortgage regulation changes looming at the time of their home search. After mortgage qualification, the next top worry for buyers is whether they can afford the mortgage payment: More than half (54%) report this as a barrier.

New and stricter mortgage requirements took effect in January 2018 with the addition of a stress test, requiring borrowers to qualify under a higher rate. The rule only applies to newly originated mortgages and is designed to prevent borrowers from taking on more debt than they can handle if interest rates go up. Since its passing, buyers’ worries are growing according to the survey. Half of Canadians (51%) say they are concerned that stricter rules will prevent them from qualifying for a mortgage, up five points since 2018.

These mortgage regulations could impact a substantial portion of potential buyers, as the survey results show a large share of Canadian homeowners (80%) get mortgages. Younger home shoppers also feel the weight of the law. Sixty-nine percent of those 18-34 years old are concerned about qualifying for a mortgage under the stricter guidelines. This worry is also present for current renters who may be considering the purchase of their first home: 66% express concerns about mortgage qualification under stricter guidelines.

About the Study
These are some of the findings of an Ipsos poll conducted between September 24 and October 8, 2019, on behalf of Zillow. For this survey, a sample of 1,503 Canadians aged 18+ was interviewed online via the Ipsos I-Say panel. Quota sampling and weighting were employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.9 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About Zillow
Zillow® is transforming how people buy, sell, rent and finance homes by creating seamless real estate transactions for today’s on-demand consumer. Zillow is the leading real estate and rental marketplace and a trusted source for data, inspiration and knowledge among both consumers and real estate professionals.

Zillow’s proprietary data, technology and industry partnerships put Zillow at nearly every major point of the home shopping experience, helping consumers search for and get into their new home faster. Zillow now offers a fully integrated home shopping experience that includes access to for sale and rental listings, Zillow Offers®, which provides a new, hassle-free way to buy and sell eligible homes directly through Zillow; and Zillow Home Loans, Zillow’s affiliated lender that provides an easy way to receive mortgage pre-approvals and financing. Zillow Premier Agent instantly connects buyers and sellers with its network of real estate professionals to help guide them through the home shopping process. For renters, Zillow’s innovations are streamlining the way people search, tour, apply and pay rent for leased properties.

In addition to Zillow.com, Zillow operates the most popular suite of mobile real estate apps, with more than two dozen apps across all major platforms. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG) and headquartered in Seattle.
Zillow and Zillow Offers are registered trademarks of Zillow, Inc.

SOURCE Zillow

Canadians can expect a vibrant spring real estate market and home prices rising

Royal LePage recommends a regional approach to mortgage stress test if the federal government goes ahead with changes in 2020

  • Home prices increase 2.2 percent in Q4 as buyers continue to move off the sidelines
  • Greater Toronto Area home prices heat up as demand outstrips supply
  • Greater Montreal Area sees the strongest appreciation rate in almost a decade
  • For what is believed to be the last time this business cycle, Greater Vancouver home prices decline year-over-year — and stabilize on a quarterly basis

According to the Royal LePage House Price Survey released today, the aggregate1 price of a home in Canada increased by 2.2 percent year-over-year to $648,544 in the fourth quarter of 2019. Similar to the third quarter, potential buyers are continuing to come back to the real estate market. In the first half of 2019, buyers had remained largely at the sidelines waiting to gauge the potential impact of the federal mortgage stress test.

“We have successfully navigated the first significant national housing market correction since the Great Recession a decade ago,” said Phil Soper, president and CEO, Royal LePage. “While the drop in the number of properties bought and sold during the 2018-19 downturn was large, the value of homes in Canada held up remarkably well, with only minor, single-digit declines in the areas of Ontario and B.C. that had experienced the most aggressive price inflation in recent years, and of course those regions still suffering from a downturn in the oil and gas sector.

“The federal government has signalled that changes could come to the mortgage stress test mechanism in 2020,” said Soper. “The stress test pushed people out of real estate markets across Canada temporarily. For the most part, buyers have adjusted, yet it still represents a significant hurdle as families pursue the dream of owning their own home.”

Soper added that the impact of the regulations-driven drop in demand is felt very differently in different parts of the country.

“We believe policymakers have the necessary experience to modify the tool to meet the reality of today’s Canada – that we have very different and varied economies, and by extension housing policy needs, from region to region,” said Soper.

The Royal LePage National House Price Composite is compiled from proprietary property data in 64 of the nation’s largest real estate markets. When broken out by housing type, the median price of a two-storey home rose 2.3 percent year-over-year to $761,817, while the median price of a bungalow increased modestly by 0.7 percent to $537,622. Data analyzed contains both resale and new build transactions, provided by Royal LePage’s sister company, RPS Real Property Solutions.

Across Canada, condominiums remained the fastest appreciating housing type, with the median price rising 3.3 percent year-over-year to $487,525. Largely, condominium data is weighted towards the country’s largest urban centres where the majority of them are found. The median price of a condominium rose 7.8 percent year-over-year to $565,919 in the Greater Toronto Area and 4.4 percent year-over-year in the Greater Montreal Area to $338,148 during the fourth quarter. However, national price gains were offset by year-over-year declines in Greater Vancouver’s real estate market where the median price of a condominium decreased 3.4 percent to $645,607. Nationally, after significant price gains in recent years in the condominium segment, double-digit gains have become rarer as the price of a detached home is now more attractive as the gap between the two segments tightens, especially for millennials looking for more space for their growing families.

According to the Royal LePage Market Survey Forecast, released in December 2019, the aggregate price of a home in Canada is expected to increase by 3.2 percent year-over-year in 2020, rising to $669,800. The company’s 2020 forecast is dependent on consistent economic conditions, assuming no new housing policy changes. Royal LePage’s 2020 forecast includes regional aggregate and housing type forecasts.

MARKET SUMMARIES

Greater Toronto Area

Low supply, population growth and increased consumer confidence continued to fuel home prices in the Greater Toronto Area. In the fourth quarter, the aggregate price of a home in the region increased by 4.8 percent year-over-year, rising to $843,609. During the same period, the median price of a standard two-storey home and bungalow increased 4.4 and 2.4 percent to $982,944 and $806,977 while condominiums rose 7.8 percent to $565,919.

“The Greater Toronto Area is at a pivot point where we are seeing signs that prices could begin to rapidly increase,” said Kevin Somers, Chief Operating Officer, Royal LePage Real Estate Services Limited. “The region has a very low supply of listings while we are seeing more potential buyers trying to enter the market.”

Home price growth varied significantly across the region. While some areas showed stabilizing prices and healthy price growth, many regions, including the city centre, showed the potential for rapidly accelerating appreciation rates driven by high demand and low inventory. Significant price gains were seen in Pickering and Mississauga, where the aggregate price increased 9.7 percent and 7.9 percent year-over-year, respectively. The aggregate price of a home in the City of Toronto increased by 6.6 percent year-over-year.

The cities of Ajax and Oshawa were the only two areas to show a year-over-year decline in aggregate price. The aggregate price of a home in Ajax and Oshawa decreased by 1.2 percent and 1.8 percent to $661,049 and $524,423, respectively.

Greater Montreal Area

In the fourth quarter of 2019, the aggregate price of a home in the Greater Montreal Area increased 6.3 percent year-over-year to $433,993, the highest rate of appreciation since the fourth quarter of 2010. High demand coupled with low inventory fueled two-storey and bungalow home prices as their median prices rose 7.2 percent and 5.9 percent respectively to $548,374 and $336,981. The median price of a condominium in the region increased 4.4 percent year-over-year to $338,148, posting the lowest increase among the three property types surveyed in the fourth quarter.

“The fourth quarter is historically the least active, but demand remained intact until the end of the year in the Greater Montreal Area,” explained Dominic St-Pierre, vice-president and general manager of Royal LePage for the Quebec region. “This increased competition has not only reduced inventory, but it has also changed seller behaviour. Sellers are more likely to wait until they find their next home before listing their current home. At this point, the seller is experiencing the same frustration as the buyer with little selection to choose from and escalating prices. This exacerbates the inventory problem.”

St-Pierre added that the upward trend in price appreciation over the past three years in the region stems from the continued good economic performance driving growth in demand across all buyer segments.

“We are currently in a ‘perfect storm’ for an exceptionally competitive spring market: interest rates are low; employment rates are healthy; listing inventory is limited; and, all buyer segments are active, including first-time buyers, baby boomers, newcomers and foreign buyers,” said St-Pierre.

Greater Vancouver

While Greater Vancouver continued to show a year-over-year decline in home prices, the fourth quarter showed signs of a market-moving towards recovery. The aggregate price of a home in Greater Vancouver decreased 4.8 percent year-over-year to $1,107,719 in the fourth quarter of 2019. In comparison, in the third quarter of 2019, the aggregate price of a home in the region had decreased by 5.2 percent compared to the same period in the previous year.

Broken out by housing type, the median price of a standard two-storey home and bungalow in Greater Vancouver decreased 4.7 percent (-4.2% in Q3) and 6.7 percent (-7.6% in Q3) year-over-year to $1,443,918 and $1,195,003, respectively, while the median price of a condominium in the region decreased 3.4 percent (-5.9% in Q3) year-over-year to $645,607.

“Sales volume is up and inventory is decreasing. This is a good sign of a recovery on the horizon,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “We’re likely to see some moderate price growth after last year’s decline in prices. The window of opportunity for buyers to get a deal is closing quickly for most typical buyers. There remain some excellent opportunities in the luxury market.”

Ryalls added that Greater Vancouver’s real estate market was fairly balanced in the fourth quarter.

“Sellers were able to purchase a new home and then sell their current property in a pretty short window,” said Ryalls. “It was a healthy market for both buyers and sellers.”

Ottawa

Low inventory and a tight rental market continue to put upward pressure on Ottawa home prices. The aggregate price of a home in Ottawa had a healthy year-over-year increase of 5.3 percent in the fourth quarter of 2019, rising to $493,947. The median price of a two-storey home increased 4.4 percent year-over-year to $521,524 while the median price of a bungalow saw a strong increase, rising 10.1 percent year-over-year to $501,195. During the same quarter, the median price of a condominium saw an increase of 2.1 percent year-over-year to $329,828.

Ottawa’s real estate market saw healthy sales activity through December,” said Kent Browne, broker and owner, Royal LePage TEAM Realty. “If demand continues to outstrip supply, we expect to see further price growth this spring.”

Browne added that Ottawa’s strong local economy, supported by good employment, entices Canadians from other regions looking to move.

Calgary

While the recovery of Calgary’s real estate market has been slow, quarter-over-quarter price trends have been encouraging for homeowners. The aggregate home price in Calgary decreased by 2.3 percent year-over-year to $469,916 in the fourth quarter of 2019. However, in the last six months of 2019, the aggregate price of a home in Calgary increased by 2.1 percent, from $460,089 in the second quarter of 2019.

Broken out by housing type, the median price of a two-storey home decreased 1.0 percent year-over-year to $514,139, while the median price of a bungalow decreased 4.1 percent year-over-year to $488,521. Meanwhile, the median price of a condominium decreased by 6.9 percent year-over-year to $265,488.

“Sales have improved and inventory has gone down in both detached houses and townhomes. Buyers are taking advantage of reduced prices, primarily in the single-family home segment,” said Corinne Lyall, broker and owner, Royal LePage Benchmark. “There is still a surplus of condos available offering an excellent choice for buyers looking at turnkey properties with little maintenance.”

Edmonton

Home prices in Edmonton were relatively flat in the fourth quarter. The aggregate price of a home in Edmonton decreased by 0.7 percent year-over-year to $379,426. Broken out by housing type, the median price of a standard two-storey home increased 1.2 percent year-over-year to $435,426 and the median price of a condominium remained relatively flat, increasing 0.3 percent to $230,969. During the same period, the median price of a bungalow decreased by 5.1 percent year-over-year to $361,943.

“Homebuyers in Edmonton have adjusted to the mortgage stress test and sellers are making appropriate compromises,” said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. “Sellers are optimistic when meeting buyers that they are ready to make a purchase.”

Shearer added that he expects to see moderate growth in home sales this spring but price growth will be modest in 2020.

Halifax

The aggregate price of a home in Halifax remained relatively flat in the fourth quarter of 2019, decreasing 0.6 percent year-over-year to $318,768. The median price of a two-storey home increased by 0.4 percent year-over-year to $336,353. The median price of a bungalow was flat with a decrease of 0.2 percent year-over-year to $267,036, while the median price of a condominium saw a decrease of 3.7 percent year-over-year to $319,897.

“Momentum and consumer confidence is building in Halifax,” said Matt Honsberger, broker and owner, Royal LePage Atlantic. “Rental inventory is tight, and inventory among homes listed for sale is a little over half of what it would have been last year. That’s the formula for price growth in the spring when demand escalates.”

Winnipeg

Winnipeg’s home prices saw strong gains in the fourth quarter. The aggregate home price in the region rose 7.4 percent year-over-year to $321,346. During the same period, the median price of a bungalow rose 5.3 percent year-over-year and the median price of a condominium rose 1.1 percent year-over-year to $306,293 and $232,875, respectively. The median price of a standard two-storey home increased 10.2 percent year-over-year to $353,536.

“Sales are up across the detached home market, and sales of homes above $800,000 have been especially brisk,” said Michael Froese, managing partner, Royal LePage Prime Real Estate. “While demand has been strong, there is ample inventory, providing buyers with a choice and maintaining affordability.”

Regina

The aggregate home price in Regina decreased by 2.8 percent year-over-year to $314,937 in the fourth quarter. The median price of a two-storey home increased 1.2 percent and the median price of a bungalow decreased by 4.6 percent year-over-year, to $387,892 and $286,402, respectively. The median price of a condominium decreased by 15.0 percent year-over-year to $200,261.

“Resale two-storey homes were struggling to compete against new build homes in 2018 as builders reduced prices to encourage sales,” said Mike Duggleby, managing partner, Royal LePage Regina Realty. “Now that the oversupply of new build homes is under control, resale homes are beginning to regain some of those price concessions.”

For more regional analysis, visit Royal LePage’s media room to find city-specific releases. The media room also contains royalty-free assets, such as images and b-roll, that are free for media use.

Source: Royal LePage Real Estate Services

First National to Provide Mortgage Underwriting Processing Services to Manulife Bank

TORONTODec. 2, 2019 First National Financial Corporation today announced that First National Financial LP has entered into an agreement with Manulife Bank of Canada (“Manulife Bank”) to provide underwriting and fulfillment processing services for mortgages originated by Manulife Bank through the residential mortgage broker channel in Ontario and Atlantic Canada.

Under the strategic agreement, First National will employ a customized software solution based on its industry-leading MERLIN technology to accept mortgage applications from the Manulife Bank mortgage broker channel and underwrite these mortgages in accordance with Manulife Bank’s credit policies, compliance standards, and controls. Manulife Bank will fund all the mortgages underwritten under the agreement and retain full responsibility for underwriting guidelines, mortgage servicing, and the client relationship. The underwriting and fulfillment services provided by First National will enable Manulife Bank to further enhance its already strong presence in the mortgage broker channel.

“This is an important agreement that leverages the distinct capabilities and strengths of both parties,” said Stephen Smith, Chairman and Chief Executive Officer of First National. “For First National, it represents the next step in the expansion of our underwriting and fulfillment services.”

First National will provide these services from its offices in Toronto. “The mortgage broker distribution channel accounts for about $90 billion of new mortgage originations each year,” said Scott McKenzie, Senior Vice President, Residential Mortgages. “This agreement further validates the channel’s relevance where First National will continue to be a lender in its own right.”

“We are very pleased to be chosen for this mandate,” said Jason Ellis, President, and Chief Operating Officer, “It’s a clear endorsement of our industry-leading technology and expertise in the independent mortgage broker channel by one of Canada’s premier financial institutions.”

Manulife Bank offers everything from everyday banking accounts to mortgages, deposits, and loans. Manulife Bank has proven that banking can be done differently and has been doing it for more than 25 years. On a mission to make lives better and decisions easier, this new agreement gives Manulife Bank greater flexibility to expand the availability of Manulife One to more Canadians.

First National will commence the underwriting and fulfillment processing services beginning in December 2019.

About First National Financial Corporation
First National Financial Corporation is the parent company of First National Financial LP, a Canadian-based originator, underwriter and servicer of predominantly prime residential (single-family and multi-unit) and commercial mortgages. With over $110 billion in mortgages under administration, First National is Canada’s largest non-bank originator and underwriter of mortgages and is among the top three in market share in the mortgage broker distribution channel.  For more information, please visit www.firstnational.ca.

SOURCE First National Financial Corporation