Kiah Grant & Associates Mortgages

10/24/2024

Equifax Inc. is launching a program to allow newcomers to transfer their foreign credit history to Canada.

The credit reporting company said Thursday that the Global Consumer Credit File will make it easier for immigrants to access services like loans and cellphone plans in Canada by providing the additional data.

“It’s really important when newcomers land that they get access to the financial services ecosystem, and without credit history that’s very difficult to do,” said Sue Hutchison, head of Equifax Canada.
“They’re typically looking to, you know, rent an apartment, get a mobile phone, probably a credit card, and all of those things require credit history. So not having it makes it very difficult for newcomers.”

Equifax isn’t the first to launch such a program in Canada. San Francisco-based Nova Credit, which launched in 2016 to provide global credit score access, expanded into Canada last year in a partnership with Scotiabank.

The company has since expanded with partnerships at RBC, BMO and Rogers Communications Inc., among others.

Nova Credit partners with several credit bureaus, including Equifax, to provide data from more than 20 countries. With Equifax becoming a competitor in the space, Hutchison said conversations are underway around data access going forward.

Equifax, which has operations or investments in 24 countries, will have the advantage of being the direct provider of data from its foreign bureaus, said Hutchison.

“It’s going be coming directly from us. So that’s, I think, very attractive to the lenders themselves that they’ll be dealing directly with the credit bureau.”

The program will initially provide data from India, but the plan is to extend it to Brazil, Argentina and Chile over the coming months. Longer-term, it plans to include 18 countries in total.

Equifax will use both the data from its own operations and source from other bureaus to provide the data.
Because countries have different ways of creating credit scores, Equifax plans to provide lenders a Canadian score, a global score and a calibrated blend of both.

The program comes as Canada has seen elevated immigration in recent years, while Hutchison said Equifax’s now cloud-based platform also makes it easier to share the data securely.

Source: By Ian Bickis The Canadian Press
Posted October 24,

10/23/2024

The biggest rate cut since the beginning of the pandemic!

10/15/2024

Canada's annual inflation rate slowed more than expected to 1.6% in September, data showed on Tuesday, prompting markets to increase bets of a 50 basis point rate cut next week.

The easing of inflation, which was mainly led by a huge drop in the price of gasoline, was the smallest annual increase in consumer prices since February 2021, Statistics Canada said.

Consumer prices in Canada have consistently eased since the beginning of the year, touching the mid-point of Bank of Canada's 1%-3% target range last month as high interest rates hobbled consumer demand and business investments.

The BoC has trimmed its policy rate by 25 basis points at each of its last three policy-setting meetings and Governor Tiff Macklem said last month there were risks that inflation could fall below its target range and economic growth could weaken, raising hopes for a larger-than-usual 50 basis-point rate cut.

Canadian swap markets increased the bets for an oversized 50 basis point rate cut next week to 67% after the inflation data was released, from roughly 52%.

"The Bank of Canada needs to do something to revive the economy and stop inflation from falling too far. Our view is that a 50 basis point rate cut is the right dose of medicine," Royce Mendes, head of macro strategy for Desjardins Group, wrote in a report.

The Canadian dollar weakened to a 10-week low after the inflation data was released to 1.3833 to the U.S. dollar, or 72.29 U.S. cents. Bond yields for government's two-year bonds fell 5.4 basis points to 3.164%.

Analysts polled by Reuters had forecast the inflation rate would cool to 1.8% from 2.0% in August. Month-over-month, the consumer price index decreased 0.4%, compared with a forecast of a 0.2% decline.

Excluding gasoline prices, however, the inflation rate remained at 2.2% in September, Statscan said.

The central bank's preferred measures of core inflation, CPI-median and CPI-trim, were also unchanged. CPI-median - or the value at the middle of the set of price changes in a month - stayed at 2.3%, and CPI-trim - which excludes the most extreme price changes - remained at 2.4%.

In September, seasonally typical easing of transportation prices also dragged down headline inflation, Statscan said.

Shelter price inflation, which the central bank has flagged as one of the areas the bank wants to see more cooling, came in at 5.0% compared with 5.3% in August.

Goods prices fell 1.0% annually in September, while services prices were up 4.0%.

Source: Oct 15 Ismail Shakil and Promit Mukherjee (Reuters)

10/10/2024

What if Canada's Mortgage Stress Test Went Away?

The government's mortgage stress test (a.k.a. "MQR") kept borrowers and lenders mostly out of trouble as rates soared from March 2022 to June 2024. It was instrumental in reducing the buildup of overborrowing, at least at federally regulated prime lenders.

Now, it's under the microscope. Could it go away altogether?

Recent words from OSFI head Peter Routledge have hinted at just that.

"We will consider the continued need for the Superintendent-prescribed minimum qualifying rate (MQR) for uninsured mortgage originations following the full and successful implementation of the Loan-to-Income (LTI) limit framework," an OSFI spokesperson told MLN today.

OSFI will require federally-regulated mortgage lenders to implement a LTI portfolio limit starting November 1 for the Big 6 banks and January 1 for lenders with calendar fiscal years.
OSFI's comments follow Routledge's revelation at a recent Global Risk Institute event where he said:

“… We're going to test [the LTI policy] next year and if it works the way we want, and we'll probably have to tighten or loosen the bolts here and there, but if it works the way we expect it to, then it is [either] a legitimate alternative or a legitimate complement to the MQR. And we'll make that decision after we have a full year of testing, to make sure if we do anything we do it right.”
Routledge said the stress test mitigated risk significantly. Yet, it's like a financial prophylactic of sorts - it does the job, but nobody's too thrilled about it.

"...There are two challenges with respect to the MQR. The first is that it really didn't stop a very substantial build-up in mortgages with very high loan-to-income ratios, which I define as 450% loan-to-income and greater."

"Unfortunately, during COVID that big block of very highly leveraged mortgages also happened to be weighted towards variable rate products that had fixed payment components to it, which we see as a manageable but serious risk concentration. For all the work we put in the MQR, I would have rather had that risk concentration not emerge. That’s the first challenge."

"The second challenge is by virtue of the way it is implemented, which is at the institution-to-borrower level. It feels to the borrower like it's OSFI regulating them individually. It's not the intent; I could read out B-20 and argue that we actually only regulate institutions and not the borrowers but if you're walking into your branch down on Main Street on a Saturday afternoon to talk about renewing a mortgage or getting a new one it feels like OSFI is regulating you and that is not the intent Parliament has ever set for OSFI."

"OSFI's job is to regulate financial institutions, not Canadians. But the MQR creates that perception and I think that’s a challenge to it. With those challenges in mind, stealing from our peer regulators and other jurisdictions, particularly the United Kingdom, we looked at this loan-to-income test."

OSFI's Peter Routledge discussing the MQR at GRI Summit 2024
Routledge casually tossed another truth gr***de at the event — this time regarding the LTI limit.

"The loan-to-income test is pretty simple. It says every quarter a bank or a lender can only lend 15% of their mortgages in that quarter to borrowers with loan-to-incomes higher than 450%. That is a very effective ceiling that stops the build of risk concentration."
Say what, now? Where did that 15% come from?

When OSFI floated its LTI concept in January 2023, it proposed a "credible, industry-wide LTI volume limit." Its example of credible was limiting quarterly originations so that no more than "20 to 30%" of mortgages (by total dollar value) could exceed 4.5x (450%) of borrower income.

If our abacus is correct, 15% is meaningfully less than 25%, which was the expectation until now (+/- 5%).

Slashing the LTI limit by 10 percentage points could have several ramifications:

Debt ratio exceptions at prime lenders would be meaningfully reduced.
Countless first-time homebuyers—and those with lower incomes—would find it more challenging to qualify.
In some cases, lower LTI limits would contribute to more sustainable household debt levels,in other cases, more borrowers could be displaced from prime lenders, pushed into the arms of more expensive non-prime lenders.

Amid the credit tightening, rental demand could increase to some degree.

It's unclear if OSFI will disclose its average LTI industry-wide.

Moreover, lenders are prohibited from revealing their individual LTI limits. If no one knows the actual overall limit, it might effectively veil the extent of OSFI's policy tightening.

Conveniently, that might help the regulator dodge some heat—and angry tweets. And public perception is clearly important to it.​

As Routledge explains it:

"When we looked at that and tested it out, we learned that a single 15% ceiling or 20% ceiling across the industry wouldn't work. We determined we would do it on a bespoke model. We would go institution by institution and calibrate it to those business models.
Our backtesting on that method tells us that it would have eliminated or at least severely blunted this risk concentration I mentioned earlier [i.e., highly-leveraged mostly variable mortgages], and it does not involve the borrower at all. It is a direct regulator-to-financial-institution metric."

"The way Canadians feel OSFI's presence through the MQR is a factor."

So again, one gets the sense that OSFI prefers to distance itself from policies that may be seen as directly and unjustly restraining individual borrowers. They'd rather be the invisible hand than the wagging finger.

Optics aside, Routledge also adds that housing market impact—while not a direct determinant of the LTI policy's effectiveness—is a factor OSFI considers.

"...Enlightened self-interest would tell us [that]...if you had a sudden and volatile shift down in the overall value of collateral that would weaken credit quality and weaken capitalization in the system. We should consider that reality..."

In other words, calibrating LTI levels will involve some trial and error. To a degree, OSFI's playing financial Jenga with our mortgage and housing markets, and they don't want to yank out the wrong block.

Source: Robert McLister Oct 09, 2024

10/08/2024

10/08/2024

The government is releasing details for lenders and insurers to offer this new insured mortgage refinancing product, effective January 15, 2025.

Parameters:
This measure will apply to all borrowers seeking to access mortgage insurance in Canada to add more units (secondary suites).

These borrowers must satisfy the following requirements:
Already own their properties.
The borrower or a close relative is occupying one of the current units.
Intend to construct additional units; and,
The additional unit(s) must not be used as a short-term rental.

Refinancing: Insured refinancing will be allowed for the purpose of building additional unit(s).

Legal Units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.

Number of Units: Maximum of four dwelling units including the existing unit.

Maximum Property Value Limit: The “as improved” value of the eligible residential property against which the loan is secured must be less than $2 million.

Maximum Loan-to-Value Limit: Up to 90% of the property value, including the value added by the secondary suite(s), combined with any other outstanding loans secured by the property.

Maximum Amortization: 30 years.
Additional financing must not exceed the project costs.

Other Parameters

Effective date: These measures will be available for mortgage insurance applications that lenders submit to mortgage insurers on or after January 15, 2025.

Read the article here: https://www.canada.ca/en/department-finance/news/2024/10/deputy-prime-minister-announces-new-actions-to-build-secondary-suites-and-unlock-vacant-lands-to-build-more-homes.html

09/25/2024

Some improvement to the policy around renewing mortgages, if you want to move to a lender with a better rate, that just got a little easier. Instead of the contract rate plus an additional 2% you can now qualify using the actual rate.

The stress test for new mortgages remains unchanged.

09/20/2024

The deal, which involves the Musqueam, Squamish, and Tsleil-Waututh First Nations, will see one-, two-, and three-bedroom units sold at 60% of their market value, with the government covering the remaining 40%.

The initiative aims to make homeownership more accessible in a city where skyrocketing real estate prices have left many prospective buyers locked out of the market.
Premier David Eby called the collaboration a "remarkable" accomplishment, especially in one of the world's most expensive real estate markets.

"The dream of home ownership has been out of reach for too many, for too long, especially here in Vancouver, " Eby said during the announcement.

The agreement allows buyers to purchase units on a 99-year lease on First Nations land. The province will finance 40% of the condo's value, to be repaid either when the unit is sold or after 25 years.
A studio apartment is expected to sell for around $372,000, while a one-bedroom unit will be priced at $510,000, and a two-bedroom condo will go for approximately $780,000. Of the 2,600 homes, about 540 will be designated as social housing.

Eby emphasized that this plan will help thousands of middle-class residents break into the housing market, allowing families to settle in Vancouver and add to its workforce and economic growth.
"This means more families living and working here can put down roots, while also addressing labour challenges and driving our economy forward," he said.

To prevent speculators from taking advantage of the reduced prices, the agreement includes several safeguards. Prospective buyers will need to meet household income thresholds, with a maximum income of $131,950 for studios and one-bedroom units. Buyers must also pre-qualify for a mortgage and make a minimum down payment of 5%.

Screening for eligible buyers is expected to begin next spring, and a randomized selection process will be used to ensure fairness, with priority given to first-time homebuyers.

The provincial government estimates its financial contribution to the project will total about $670 million in loans. However, Eby noted that the government's investment would eventually be recouped when buyers sell their homes or after the 25-year repayment period.

The premier also hinted at expanding similar initiatives across the province, adding that affordable housing would be a key focus of the NDP's platform in the upcoming election.

Source: Candyd Mendoza, CMP 20 Sep. 2024

09/17/2024

It’s been an exciting week for mortgage brokers, with both policy improvements and favourable economic news!

The significant improvements in federal mortgage policies likely create better opportunities for clients to secure better mortgages, while hitting inflation targets will lead to lower interest rates. This combination will make homes more affordable and improve access to mortgages for potential homeowners.

CPI news:
Canada's inflation rate fell to 2% in August, hitting Bank of Canada's target.

Canada's inflation rate decreased to two per 2% in August, Statistics Canada reported on Tuesday, finally hitting the Bank of Canada's target in its long campaign to cool price growth.

The central bank began aggressively hiking interest rates in April 2022 to tame skyrocketing inflation and made its first rate cut since March 2020 in July.

"Our confidence that inflation will continue to move closer to the 2% target has increased over recent months," Macklem said at the time.

Last month's 2% rate marks the slowest pace of growth since February 2021. The Bank of Canada's preferred core measures of inflation also ticked down a notch.

"Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate," wrote CIBC senior economist Andrew Grantham in a note to clients.

"We continue to forecast a further 200 [basis points] of interest rate cuts between now and the middle of next year."

Bank of Canada cuts key interest rate to 4.25%, citing cooling inflation.
Inflation edged down in August mostly due to a drop in gasoline prices, which are considered volatile. When gasoline is excluded, the rate came in at 2.2%.

Mortgage interest, rental costs largest contributors.
As has long been the case, mortgage interest and rental costs were the largest contributors to the consumer price index in August, though mortgage interest growth is slowing, the data agency noted.

Grantham noted that if mortgage interest costs were excluded from overall inflation, the rate would have come in at 1.2% year over year.

Consumers paid 2.4% more for groceries in August, the result of what economists call a base-year effect — the impact of comparing prices in a given month to the same month a year earlier.

Meanwhile, the price of clothing and footwear declined, atypical during a back-to-school shopping month, and electricity prices grew at a slower pace.

The Bank of Canada will hold its next interest rate meeting on Oct. 23. Some economists say the question isn't whether the central bank will cut, but whether the cut will be 25 basis points or 50.

Source:
Jenna Benchetrit · CBC News · Posted: Sep 17, 2024

09/16/2024

Economists polled by Reuters on Friday suggested that inflation could slow by 40 bps to 2.1% on Tuesday. That would be just a hair above the 2% target.

This marks a notable drop in the consensus, which was closer to 2.4% in the last poll we saw. There's a good chance that yields could trade down if a CPI reading of 2.1% y/y materializes. According to the latest Monetary Policy Report from July, the Bank of Canada didn't expect that kind of number until well into 2025. Hence, we'd be comfortably ahead of schedule.

Reuters polls have averaged within 0.16 of the actual inflation print over the past year. So, a pleasant inflation surprise on Tuesday seems reasonably likely.

Source:
Rob McLister, Mortgage Logic
Sept 16,2024

09/16/2024

Big news!

This move will open doors for many more first-time homebuyers!

The federal government is raising the cap on insured mortgages to $1.5 million and expanding access to extended mortgage amortization periods, a bid to tackle a housing affordability crisis that’s put homeownership out of reach of scores of Canadians.

Finance minister Chrystia Freeland said on Monday that the government was increasing the limit on insured mortgages from its previous level of $1 million and allowing homebuyers to take out a 30-year loan if they’re buying for the first time or purchasing a newly built house.

The government had previously indicated that a 30-year amortization would only be available to first-time buyers who were purchasing a newly built home.

Freeland’s move to hike the insured cap addresses a longstanding mortgage industry grievance – namely, that the previous limit was freezing some buyers out of being able to purchase a home.

It means insurance, which is required for home purchases with a downpayment of less than 20%, is now available to Canadians buying a property for up to $1.5 million.

That could prove significant in markets like Toronto and Vancouver, where average prices sit well over the $1 million mark – although eyewatering price appreciation remains a major hurdle for many prospective buyers.

Freeland said the measures would “put the dream of homeownership in reach for more young Canadians,” and first-time buyers would be “in a stronger position” after the adjustments, also highlighting the prospect of an uptick in homebuilding as a result.

Both changes are scheduled to come into effect on December 15.

Source:

Fergal McAlinden, CMP Sept 16,2024