Sharp, deep, and unprecedented – The Conference Board of Canada releases its Provincial Economic Outlook

With the advent of the COVID-19 pandemic, Canada is in the midst of an economic downturn, unlike anything most of us have ever experienced. The Conference Board of Canada’s Provincial Economic Outlook – Preliminary Forecast Spring 2020 shows that Canadian real GDP will drop by 25 per cent in the second quarter. This will be the steepest quarterly decline in economic output on record, based on modern statistics that date back to 1961.

“Physical distancing requirements as well as the closure of non-essential businesses have brought a large portion of the economy to a standstill,” says Alicia Macdonald, Associate Director, Economic Forecasting, at The Conference Board of Canada. “As a result, every province has fallen into recession. Our forecast expects that the downturn will be short-lived and growth will resume in the second half of the year, assuming businesses slowly reopen over the spring and summer.”

The arrival of the COVID-19 pandemic has devastated the economic outlook for all provinces. Moreover, the collapse in oil prices is amplifying the economic hardship in the energy-producing provinces. The forecast for 2020 calls for a steep decline in economic growth in every province.

Some key findings:

  • With GDP contracting in the first half of the year, the Canadian economy is on track to decline by 4.3 per cent in 2020.
  • Newfoundland and Labrador is set to enter a recession this year, with its economy contracting by 3.8 per cent as the province deals with the decline in oil prices and sharp reductions in global and domestic demand.
  • In Prince Edward Island, the economy will contract by 3.0 per cent in 2020, with the contraction in tourism activity a key driver of this outcome.
  • The broad-based slowdown in global and domestic demand will see New Brunswick’s economy shrink by 3.3 per cent this year. This revision to our previous forecast is the smallest among all provinces, as health care makes up a larger than average share of the New Brunswick economy.
  • Nova Scotia’s economy is forecast to contract 3.6 per cent this year. Both export-intensive and domestic-oriented industries are seeing a massive drop in demand due to the coronavirus pandemic.
  • In an attempt to slow the spread of COVID-19, Quebec has shut down businesses deemed non-essential until at least May 4, 2020. With activity restricted and consumer and global demand falling, the province’s real GDP will decline 3.8 per cent this year. Buoyed by various income support programs, Quebec’s economy will bounce back next year, gaining 5.8 per cent.
  • In Ontario, real GDP is forecast to decline by 3.2 per cent this year, one of the smallest declines among the provinces. A large concentration of professional service activities (which can be done remotely) and the retooling of some facilities to produce medical supplies are helping to lift the outlook for Ontario relative to other provinces.
  • Manitoba’s economy is set to contract by 3.9 per cent this year as the impacts of COVID-19 reduce household spending and weigh on demand in key industries, such as transportation equipment manufacturing.
  • Saskatchewan will experience one of the largest declines in output this year as the negative impacts of COVID are layered on top of the weakness in the province’s mining industry. Overall, the province is looking at a decline in real GDP of 5.0 per cent this year before rebounding by 5.4 per cent in 2021.
  • Alberta is grappling not only with the impacts of COVID-19, but also with a severe contraction in oil prices resulting from the steep drop in global demand (due to the pandemic) and the price war between Russia and Saudi Arabia. We expect the economy to contract by 5.8 per cent in 2020, which would be the worst annual decline on record. Fortunately, the downturn will be temporary, and the economy will rebound with 6.1 per cent growth in 2021.
  • British Columbia’s economy is projected to contract by 3.2 per cent this year. Some consumer-facing industries face a near-halt to activity while the slowdown in international trade is weighing on port and transportation activity.

Source: The Conference Board of Canada

Mortgage Deferrals in Canada Reach Half a Million

Banks in Canada last month announced plans to provide financial relief to Canadians impacted by the economic consequences of COVID 19. Banks assembled quickly and made a commitment to work with their customers to provide flexible solutions to help them manage through financial hardship. This support includes up to a six-month payment deferral for mortgages.

Almost 500,000 requests for mortgage deferrals or skip a payment have already been completed or are in process since Canada’s banks announced a mortgage deferral program over two weeks ago. Taken together, the country’s six largest banks have deferred more than 10% of the mortgages in their portfolio. The large number of customers who have been helped continues to grow as a result of concerted efforts by front-line workers, contact centre agents and operations teams working diligently.

“Canada’s banks are standing by Canadians and have stepped up to help our country work through these challenging times,” said Neil Parmenter, President and CEO, Canadian Bankers Association. “The COVID-19 pandemic is the most urgent challenge our country has faced in recent memory, and banks will continue to make a positive difference for those who need their help and support.”

According to the Canada Mortgage and Housing Corporation, the average monthly mortgage payment of Canadian homeowners is $1,326. Therefore, the cash flow freed up for Canadians from the deferrals completed to date is roughly $663 million per month, or nearly $2 billion per quarter. This number will increase over the coming weeks.

Banks will continue to support individuals, businesses, employees, and communities across Canada as we come together to manage the financial uncertainty and economic disruption faced by our families, friends and neighbours.

Please visit your bank’s website for more information on mortgages and deferring payments:

BMO Financial Group

CIBC

National Bank of Canada

RBC

Scotiabank

TD Bank Group

Source: Canadian Bankers Association

The Canadian Bankers Association is the voice of more than 60 domestic and foreign banks that help drive Canada’s economic growth and prosperity. The CBA advocates for public policies that contribute to a sound, thriving banking system to ensure Canadians can succeed in their financial goals. www.cba.ca

Canadian home sales and listings down in March

Statistics released today by the Canadian Real Estate Association (CREA) show national home sales and listings were down sharply between February and March 2020.

 

Highlights:

  • National home sales fell 14.3% on a month-over-month (m-o-m) basis in March.
  • Actual (not seasonally adjusted) activity was up 7.8% year-over-year (y-o-y).
  • The number of newly listed properties dropped 12.5% m-o-m.
  • The MLS® Home Price Index (HPI) advanced by 0.8% m-o-m and 6.9% y-o-y.
  • The actual (not seasonally adjusted) national average sale price climbed 12.5% y-o-y.

Home sales recorded over Canadian MLS® Systems dropped by 14.3% in March 2020 compared to February, as the economic turmoil and physical distancing rules surrounding the COVID-19 pandemic caused both buyers and sellers to increasingly retreat to the sidelines over the second half of the month.

Transactions were down on a m-o-m basis in the vast majority of local markets in March. Among Canada’s largest markets, sales declined in the Greater Toronto Area (GTA) (20.8%), Montreal (-13.3%), Greater Vancouver (-2.9%), The Fraser Valley (-13.6%), Calgary (-26.3%), Edmonton (-13.2%), Winnipeg (-7.3%), HamiltonBurlington (-24.9%) and Ottawa (-7.9%).

Actual (not seasonally adjusted) sales activity was still running 7.8% above a quiet March in 2019, although that was a considerable slowdown compared to the y-o-y gain of close to 30% recorded in February.

March 2020 will be remembered around the planet for a long time. Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian REALTORS®,” said Jason Stephen, president of CREA. “After Friday the 13th, everything went sideways. REALTORS® are complying with government directives and advice, all the while adopting virtual technologies allowing them to continue showing properties to clients already in the market, and completing all necessary documents. They remain your best source for information and guidance when negotiating the sale or purchase of a home in these unprecedented times,” continued Stephen.

“Numbers for March 2020 are a reflection of two very different realities, with most of the stronger sales and price growth recorded during the pre-COVID-19 reality which we are no longer in,” said Shaun Cathcart, CREA’s Senior Economist. “The numbers that matter most for understanding what follows are those from mid-March on, and things didn’t really start to ratchet down until week four. Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year.”

The number of newly listed homes declined by 12.5% in March compared to February. As with sales activity, declines were recorded pretty much across the country.

With sales and new listings each falling by similar magnitudes in March, the national sales-to-new listings ratio edged back to 64% compared to 65.4% in February. While this is down slightly, the bigger picture is that this measure of market balance was remarkably little changed considering the extent to which current economic and social conditions are impacting both buyers and sellers.

Considering the degree and duration to which market balance readings are above or below their long-term averages is the best way of gauging whether local housing market conditions favour buyers or sellers. Market balance measures that are within one standard deviation of their long-term average are generally consistent with balanced market conditions.

Based on a comparison of the sales-to-new listings ratio with the long-term average, two-thirds of all local markets were in balanced market territory in March 2020. Virtually all of the remainder continued to favour sellers.

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 4.3 months of inventory on a national basis at the end of March 2020. While this is up from the almost 15-year low of 3.8 months recorded in February, it remains almost a full month below the long-term average of 5.2 months. With the overall number of listings on the market continuing to fall in March, the m-o-m decline in the months of inventory measure was entirely the result of the outsized drop in sales activity.

National measures of market balance continue to mask significant regional variations. The number of months of inventory is well above long-term averages in the Prairie provinces and Newfoundland & Labrador. By contrast, the measure is running well below long-term averages in OntarioQuebec and the Maritime provinces. The measure remains in balanced territory in British Columbia.

With measures of market balance at this point little changed from recent history, and most of the impact on sales and listings from the COVID-19 situation only showing up towards the end of March, the impact on housing prices will likely take a little longer to become apparent. Price measures for March 2020 were strongly influenced by very tight markets and a very strong start to the spring market in many parts of Canada before physical distancing measures were implemented.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% in March 2020 compared to February, marking its 10th consecutive monthly gain.

The MLS® HPI was up in March 2020 compared to the previous month in 16 of the 19 markets tracked by the index.

Looking at the major Prairie markets, home price trends have ticked downwards in Calgary and Edmonton to start 2020 but have generally been stable since the beginning of last year. Prices in Saskatoon have also been stable over the last year, while those in Regina have continued to trend lower. Prices in Winnipeg have been on a slow upward trend since the beginning of 2019.

Meanwhile, the recovery in home prices has been in full swing throughout British Columbia and in Ontario’s Greater Golden Horseshoe (GGH) region. Further east, price growth in OttawaMontreal and Moncton continues as it has for some time now, with Ottawa and Montreal prices accelerating to start 2020.

Comparing home prices to year-ago levels yields considerable variations across the country, although for the most part trends are still regionally split along east/west lines, with gains ranging near the low double-digits from Ontario east, more modest gains in B.C., and a mixed bag of even smaller gains and some declines across the Prairies.

The actual (not seasonally adjusted) Aggregate Composite MLS® HPI rose 6.9% y-o-y in March, the biggest year-over-year gain since January 2018.

Prices are in positive y-o-y territory in Greater Vancouver (+2.1%) and the Fraser Valley (+2%). Elsewhere in British Columbia, home prices logged y-o-y increases about twice as large in the Okanagan Valley (+5.1%), Victoria (+5%) and elsewhere on Vancouver Island (+4.3%).

Calgary and Edmonton continued to post small y-o-y price declines (-0.8% and -1.3%, respectively), while the y-o-y gap was -5.1% in Regina. Prices in Saskatoon (+0.4%) and Winnipeg (+1.2%) both posted small y-o-y increases in March.

In Ontario, home price growth has re-accelerated across the GGH, with a number of markets posting double-digit y-o-y growth in the 11% range. Meanwhile, price gains in recent years have continued uninterrupted in Ottawa (+15.8%), Montreal (+11.3%) and Moncton (+8.1%).

All benchmark home categories tracked by the index accelerated further into positive territory on a y-o-y basis. Apartment units posted the biggest y-o-y increase (+7.4%) followed closely by prices for two-storey single family homes (+7.3%). One-storey single-family home prices were up 6.2% y-o-y in March, while prices for townhouse/row units climbed 5.6%.

The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.

The actual (not seasonally adjusted) national average price for homes sold in March 2020 was just over $540,000, up 12.5% from the same month the previous year.

The national average price is heavily influenced by sales in the GVA and GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from calculations cuts more than $130,000 from the national average price, trimming it to around $410,000.

PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry associations, representing more than 130,000 REALTORS® working through 90 real estate boards and associations.

Further information can be found at http://crea.ca/statistics.

SOURCE Canadian Real Estate Association

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