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04/26/2024

TD mortgage customers who are on an accelerated amortization schedule may be able to reduce their mortgage payment as long as the new payment amount keeps their payment schedule (actual amortization) within their contractual remaining amortization.

What you need to know:
Customers who are looking to reduce their mortgage payments may be able to adjust their payment to any amount as long as that amount keeps their payment schedule within their contractual remaining amortization.

Only one change can be processed at a time. If a customer requests more than one change, they cannot proceed with additional changes until each previous change has been processed.

Definitions:
Actual Amortization is the length of time at the current frequency/payment amount it takes to pay off a mortgage in full.

Contractual Remaining Amortization is the length of time it would take to pay off a mortgage in full if the customer makes the same payments and at the same interest rate

03/11/2024

First National Residential Mortgage Commentary -
Debt strain & delinquencies

Equifax recently released some unsettling numbers underscoring the housing affordability and cost-of-living challenges in Canada.

The credit tracking firm says mortgage delinquency rates rose by more than 52% between the fourth quarter of 2022 and Q4 of 2023. It also says non-mortgage debts that are 90 days, or more, overdue climbed nearly 29% during the same period.

Those figures seem pretty alarming and they are worth noting because they suggest a troubling trend. But the actual amount of delinquency in Canada remains low: just 0.14% for mortgages at the end of 2023 (up from 0.09% in ’22) and 1.3% for non-mortgage loans (up from 1.0% a year earlier).

Ontario and British Columbia saw the biggest increases, with mortgage delinquencies up by 135% and 62% respectively. Financially stressed mortgage holders in those two provinces are increasing missing credit card payments as well. It is a particularly notable problem for younger homeowners; those under age 37.

The report says there has been a sharp increase in the number of mortgage holders who are filing for bankruptcy. Filings were up 23% nation-wide, led by a 76.5% spike in Ontario.

Equifax warns about the potential for even bigger numbers, as more than two million mortgages are coming up for renewal over the next two years, at significantly increased rates.

A separate report by TransUnion puts total consumer debt in Canada at $2.4 trillion in Q4 2023, up nearly 3.0% from a year earlier.

03/05/2024

First National Residential Mortgage Commentary
Falling rates reignite home buying intentions

Hopes that falling interest rates will help improve housing affordability likely will not be realized. A new survey by Royal Lepage suggests pent-up demand is high, while the real estate stats show housing supply remains low.

Two years ago, this month, the Bank of Canada started a fast and steep run up in its key overnight lending rate as it tried to knock down rapidly rising inflation. None the less, real estate continued to attract interest with more than a quarter of the country’s adult population (27%) active in the market. However more than half of those people say they had to put their house hunting on hold because of the higher rates.

Now, the fight against inflation appears to be working. The Consumer Price Index showed a 2.9% annualized increase in January, bringing it back inside the central bank’s target range of 1.0% to 3.0%. Expectations for a rate cut later this year are wide spread and buyers seem ready to pounce.

According to the Royal Lepage survey, half (51%) of those who say they put their home purchase plans on hold, now say they will re-enter the market if rates drop. A decline of just 25 basis points (one-quarter of one percent) would be enough to bring 10% of those people back, while 23% need to see a drop of more than 100 bps (more than a full percentage point) before they step off the sidelines.

The latest figures from the Canadian Real Estate Association show a continuing shortage of homes for sale. The sales-to-new listings ratio was nearly 59% in January. That is markedly tighter than the 50% reading just 3-months earlier, and tighter than the long-term average of 55%.

02/27/2024

First National Residential Mortgage Commentary -
One MILLION dollars

“A dollar don’t buy what it used to.” And even a million of them is still not enough according to some Canadian house hunters.

Royal LePage is out with its latest Million Dollar Properties Report. It suggests more than 20% of Canadians feel that $1 million is not enough to buy a home that meets their needs in the area where they currently live. On the flip side of that, more than 60% of Canadians are convinced that $1 million is a reasonable budget for a home with 41% saying it is “more than enough” and 22% calling it “adequate”.

Not surprisingly that level of optimism changes by region. Just 18% of respondents in B.C., and 30% in Ontario agree that $1 million is more than enough. In Manitoba/Saskatchewan it is 60% and in Quebec it is 59%.

What do you get for $1 million? Well, it comes down to the old adage, “Location Location Location”. In Calgary, $1 million is seen as the “move up” price point. In Toronto and Vancouver, it is the entry level.

On average a $1 million home in Canada is 1,760 square feet with 3.2 bedrooms and 2.1 bathrooms. In Edmonton your million will get you 2,675 square feet of floor space, 3.3 bedrooms and 2.9 bathrooms. In Vancouver that shrinks to 900 square feet, 1.8 bedrooms and 1.6 bathrooms.

The stats for 2023 are virtually the same as 2022. The big change, according to Royal LePage, has come in affordability as carrying costs have climbed substantially due to higher mortgage rates.

02/21/2024

What does your Equifax credit report say about you?

John and his wife want to visit as many countries as possible. With two teenagers, John spends nearly as much time driving them to hockey games and band practices as he does at work, but he always finds time for a quick bike ride.
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With so much going on, John uses apps on his cellphone to remind him to pay his bills on time and track his spending so he doesn’t go over his credit card limit.
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When lenders and creditors check his credit report, they’ll see John has a long credit history, has never missed a payment, and stays under his credit limit. As such, he’s more likely to qualify for a new credit card with better travel rewards or a new mobile plan with the latest smartphone.
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When employers review his credit report, they’ll see he’s financially responsible, and that could make him a good candidate for the new job he’s been eyeing to help pay for his next family trip.

02/20/2024

First National Residential Mortgage Commentary
January sales jump

There was another surprising jump in home sales in January.

The Canadian Real Estate Association reports a 3.7% increase over December, and a 22% increase compared to a year earlier. (December 2023 sales were up nearly 9.0% from November and up nearly 4.0% from December of 2022.)

But, as CREA points out, January’s jump is largely based on very low sales numbers last January. Several market watchers are reminding us that winter sales figures tend to be variable, making it difficult to forecast trends. Several believe that the relatively mild winter in many of the country’s big markets has encouraged buyers.

Easing prices, falling fixed mortgage rates and hopes for interest rate cuts by the Bank of Canada also seem to be bringing people back into the market.

“These trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years," said CREA's Senior Economist Shaun Cathcart.

The number of new listings rose 1.5% in January, over December.

The National Average Home Price is up 7.6% compared to last January, at $659,395. CREA’s preferred measure, The Aggregate Composite Home Price Index, rose 0.4%.

Canada Mortgage and Housing reports housing starts fell 10% in January compared to December. The decline was led by a 11% slowdown in starts in urban areas, in particular a 14% drop in starts of multi-unit dwellings. New construction of single-detached urban homes saw a very modest increase of 0.08%.

02/13/2024

First National Residential Mortgage Commentary
Affordability and the Bank of Canada

Real estate and housing affordability have jumped into the spotlight since the last rate announcement by the Bank of Canada. In speeches and interviews since the January 24th setting Governor Tiff Macklem has been pushing back against the idea that the Bank could help affordability by cutting intertest rates.

In the Monetary Policy Report that came with the last rate announcement the Bank recognized that shelter cost inflation, which includes mortgage interest and rent, are key drivers of "above target inflation", but Macklem says it is beyond the Bank’s control.

"Monetary policy cannot prevent short-term swings in prices. Monetary policy cannot solve the underlying structural issues that are behind the lack of housing supply,” Macklem said during a speech on February 6th.

"There are many reasons why: zoning restrictions, delays and uncertainties in the approval processes and shortages of skilled workers. None of these are things monetary policy can address."

The Bank’s current high interest rates do not appear to have quelled the desire for ownership. For example, January sales in Toronto shot up 37% compared to a year earlier, seemingly, based on the notion that rates are not going up anymore, and are expected to drop later this year. Although that timing keeps getting pushed back.

The latest GDP and job numbers, which show continued economic growth and lower unemployment, support the Bank's “higher for longer” stance.

02/06/2024

First National Residential Market Update

The Bank of Canada has been about as clear as it can be about the future course for interest rates. They are not likely to go up, but they will not be coming down anytime soon either.

During an appearance before the Commons Finance Committee last week Governor Tiff Macklem repeated and refined many of the statements he made during the Bank’s rate announcement on January 24th.

Macklem told the politicians the Bank is pleased with the decline in inflation but it needs “assurance” that inflation is trending back toward 2.0%.

“So yes, you do want to start lowering interest rates before you’re all the way back, but you don’t want to lower them until you’re convinced…that you’re really on a path to get there, and that’s really where we are right now,” he said.

Inflation ticked back up to 3.4% in December from 3.1% in October and November. Core inflation, the Bank’s preferred measure, remains stuck at about 3.5%.

Macklem also acknowledged that “Shelter Inflation” has been a key contributor to core inflation. But he resisted calls to take shelter costs out of the calculation. Macklem said removing shelter, which some people see as a temporary anomaly, would require other items, which are reducing inflation, to be dropped as well. That would leave core inflation pretty much where it is right now.

Macklem encouraged the politicians to take steps to increase the supply of shelter to meet the high and growing demand.

01/30/2024

First National Residential Mortgage Commentary
BoC shifts focus from how high to how long

As expected the Bank of Canada has held its trendsetting policy rate at 5.0%. It is the fourth hold in a row.

What did change is the Bank’s thinking about what comes next. Governor Tiff Macklem made it clear the Bank is happy with the way the current interest rate is easing demand and slowing inflation. The Bank is now watching to see how long it will have to keep the rate in place. Macklem also said it is premature to start talking about interest rate cuts.

For the first time the Bank zeroed-in on the impact high shelter costs are having on inflation, calling them the biggest contributors to above-target inflation.

“Mortgage interest costs are boosting inflation to a greater extent than in previous episodes of monetary policy tightening,” the Bank said in its Monetary Policy Report.

There is concern among some market watchers that the Bank’s rate pause could trigger another burst of activity in the housing market, similar to the spike that came after a rate pause early last year.

However, the Bank’s Senior Deputy Governor Carolyn Rogers says the Bank is monitoring risks associated with an “unexpected surge in house prices” putting “upward pressure on inflation”. Rogers also noted, the risk is not in the Bank’s “base case” scenario, and is not driving their decision making at the moment.

Other market watchers worry that maintaining high interest rates will exacerbate high shelter costs, especially higher mortgage interest. They argue homeowners could be forced to shift their spending, pulling money out of the broader economy and creating an even greater slowdown.

01/29/2024

Inflation and cost of living seen as 2024’s biggest financial challenges

Despite inflation growth having slowed from its 2022 high of 8.10%, Canadians still see it as one of their biggest financial hurdles for this year, according to a survey commissioned by TD.

The survey found that the majority of established Canadians (58%) as well as 38% of new Canadians expect inflation and the cost of living to pose the largest financial challenges of the year.

The survey also found that 36% of Canadians feel less positive about the financial outlook in 2024 compared to 2023, with just 19% feeling more positive about this year.

New Canadians, on the other hand, were decidedly more optimistic about their financial future this year compared to last (67%), with only 15% feeling less optimistic.

01/29/2024

Housing starts fell 7% in 2023: CMHC

Fewer new homes started construction in 2023 compared to 2022, according to figures from the Canada Mortgage and Housing Corporation (CMHC).

For the full year, construction began on a total of 223,513 units, a 7% drop from the 240,590 units started in 2022. Leading the decline were starts for single-detached homes, which saw a 25% year-over-year decline.

Depsite the slowdown, CMHC said the pace was still better than expected given the current economic backdrop over the course of the year.

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