http://www.mortgagecentre.com/franciscofranknuguid

Frank Nuguid at The Mortgage Centre, Richmond Hill, ON (2026)

02/08/2022

Toronto Overtakes Vancouver as Most Expensive Real Estate Market
(Steve Huebl·Real Estate·February 7, 2022)

The Greater Toronto Area has just become the most expensive real estate market in the country.

While not a particularly envious title to hold, Toronto has unseated Vancouver, which for decades had been Canada’s priciest place to buy a home.

The benchmark MLS Home Price Index for Toronto reached $1.26 million in January—a 4.3%, or $52,000, jump from December—overtaking Greater Vancouver’s benchmark price of $1.255 million.

“It’s a stunning development though not entirely surprising considering how hot the Toronto-area market has become, especially since the fall,” noted RBC economist Robert Hogue. “Competition between buyers is as fierce as ever. Intense bidding wars have pushed prices to new heights both in level ($1.260 million for the composite MLS HPI benchmark) and rate of increase (33.3%).”

Hogue added that he doesn’t see any material change in this trend in the near-term, until forthcoming interest rate hikes “gradually cool things down” by later this year.

“The housing crisis in Toronto hit a new level in January,” analyst Ben Rabidoux wrote in his monthly Edge Realty Analytics report.

“We’ve now surpassed 2017 peak price acceleration levels,” he added. “Back then, these prices forced regulators and policy-makers to tighten mortgage underwriting and implement a foreign buyer tax. The difference then was that it was almost entirely a Toronto story.”

Now, home prices across the province are seeing gains of between 25% and 50%, he noted.

05/21/2021

Insured and Uninsured Mortgage Stress Test Changes Confirmed for June 1, 2021

Starting June 1, both insured and uninsured mortgage borrowers will be subject to a stricter stress test when qualifying for their mortgage.

The Office of the Superintendent of Financial Institutions (OSFI) confirmed on Thursday that it will move ahead with its stress test changes first announced last month, which will apply to uninsured mortgages (typically those with more than a 20% down payment).

Soon after, the Department of Finance confirmed it will follow OSFI’s lead, and apply the same stricter higher qualifying rate to insured mortgages, or those with less than 20% down.

In both cases, borrowers will need to prove they can afford payments based on the higher of the contract rate plus 2%, or a new floor rate of 5.25%, up from the current 4.79%.

“The recent and rapid rise in housing prices is squeezing middle class Canadians across the entire country and raises concerns about the stability of the overall market,” Finance Minister Chrystia Freeland said in a statement. “The federal government will align with OSFI by establishing a new minimum qualifying rate for insured mortgages…It is vitally important that homeownership remain within reach for Canadians.”

Both OSFI and the DoF said they will review the floor rate annually, likely each December at a minimum.

The Impact on Borrowers
Applying the higher stress test to insured borrowers will impact roughly 1 in 5 mortgage borrowers, according to data from the Bank of Canada. It will also take direct aim at first-time borrowers who are more likely to be putting less than 20% down on a mortgage.

The higher minimum stress test is expected to cut maximum buying power by between 4% and 4.5%. For a median-income household, that would reduce the maximum purchase price from $442,000 to $422,000, according to previous estimates from National Bank.

It’s estimated that this change will reduce purchasing power for uninsured borrowers by between 4% and 4.5%. By comparison, the B-20 stress test implemented in January 2019 requiring homebuyers to qualify at the higher of either the 5-year posted rate or the contractual rate plus 200 basis points reduced purchasing power by 22%.

“Today’s news is both bad news and good news for (first-time buyers),” wrote Rob McLister, mortgage editor at RATESDOTCA. “Obviously, it cuts buying power, but that also means fewer people will be able to bid as much for homes, reducing some price pressure.”

Mortgage Professionals Canada issued a statement to members on Thursday, noting it was disappointed that the minister decided to move so quickly in applying the stricter stress test to insured mortgages.

“Given the traditional audience for insured mortgages, namely young aspiring middle-class families, single individuals, and the recently separated, all owner occupiers of the properties they purchase, MPC would have preferred the insured qualification rate had not been increased in the interest of this community,” the association said. “Given the rapid rise in prices, making qualification more stringent now will disqualify many of the Canadians the government has promised to support.”

Bank of Canada Concerned About Home Prices, Household Debt
The new stress test changes fell on the same day that the Bank of Canada voiced concern about unsustainable house prices and growing household debt.

“It is important to understand that the recent rapid increases in home prices are not normal,” Bank of Canada Governor Tiff Macklem said following the release of the Bank’s annual Financial System Review, which found the share of highly indebted households taking out mortgages is now up to 22%.

“Some people may be thinking that the kind of price increases we have seen recently will continue. That would be a mistake,” Macklem added. “Interest rates are very low. That means there is more potential for them to go up…Borrowers and lenders both have roles in ensuring that households can still afford to service their debt at higher rates.”

The Bank also unveiled a “House Price Exuberance Indicator” meant to measure nine major markets across Canada for expectations that local home prices will continue to rise. The indicator currently finds that the Toronto region, Montreal and Hamilton are in exuberant territory, with Ottawa not far off.

(By Steve Heubl, Mortgage News, May 21, 2021)

03/11/2021

Bank of Canada Still Sees Low Rates Until 2023; Financial Markets Disagree (by Steve Huebl, Canadian Mortgage Trends March 10, 2021)

The Bank of Canada delivered welcome news for variable-rate mortgage holders today when it stood by its expectation of no rate hikes until early 2023.

“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved,” reads the BoC statement released following its rate decision. “In the Bank’s January projection, this does not happen until into 2023.”

In its decision, the Bank left its key overnight rate unchanged at 0.25%, where it’s been for the past year.

Despite the economy proving “more resilient than anticipated” during the second wave of the pandemic, resulting in a stronger near-term outlook, the Bank noted there remains “considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth.”

As a result, in addition to keeping interest rates low, the Bank said it will maintain its current bond-buying pace of at least $4 billion each week, which it says will continue until the recovery is “well underway.”

Also known as Quantitative Easing, this program has helped keep fixed mortgage rates lower than they otherwise would be. The Bank’s large-scale asset purchases keep upward pressure on bond prices, resulting in lower yields, which lead fixed mortgage rates.

The program has largely achieved its objective of keeping borrowing costs lower for households and businesses for much of the past year, but a recent surge in yields in late February has led to a sustained increase in fixed mortgage rates. Five-year fixed rates are now about 20 to 30 basis points higher than they were just weeks ago.

The Bank indicated in January that it would begin to reduce the pace of bond purchases if growth was in line with its expectations. A number of analysts have suggested that tapering could begin as early as April.

Financial Markets at Odds with BoC’s 2023 Rate-Hike Call
Despite the BoC sticking to its script that it foresees the overnight rate remaining unchanged for the next two years, financial markets see rate hikes closer on the horizon.

As of today, OIS prices tracked by Bloomberg imply about a 40% chance of a 25-bps rate hike by year-end. That could result in today’s prime rate of 2.45% rising to 2.70% and immediately boosting borrowing costs for variable-rate mortgage holders. However, markets are still largely expecting the first rate hikes to begin by mid-to-late 2022.

Bond traders see two to three BoC rate hikes by 2024, resulting in prime rate rising by 50 to 75 bps.

“That kind of monetary tightening is nothing to panic over,” writes RateSpy’s Robert McLister, noting it would be “historically modest” for a rate-hike cycle following a recession. Historically, rates have risen about 200 basis points from their lows in previous policy-tightening cycles.

He adds that those who already have a variable rate could still enjoy another full year of a near-record low prime rate, or “maybe 2+ years if you’re lucky.”

Should the BoC be Worried About Runaway Inflation?
The Bank also touched on the strong 9.6% growth in GDP recorded in the fourth quarter, adding that it now expects Q1 GDP growth to be positive rather than the contraction originally forecast.

Indeed, strong economic growth prospects have been largely responsible for the recent run-up in bond yields, which are driving fixed rates higher. The BoC warned that CPI inflation is likely to move to the top of its 1-3% target band over the next few months, but added that the expected rise “reflects base-year effects from deep price declines in some goods and services at the outset of the crisis a year ago.”

“We expect the BoC will look through a largely energy-driven increase in headline inflation in Q2, but note that risks are tilted to the upside as the economy re-opens with the potential for demand to outpace supply in some sectors,” writes Josh Nye of RBC Economics. “Our base case, though, assumes headline inflation will slip back below 2% by the end of this year and that underlying inflation won’t be sustained at the BoC’s 2% target until 2022.”

TD senior economist Sri Thanabalasingam said there are two reasons why inflationary pressures haven’t yet forced the Bank to revisit its level of monetary support through QE.

“One, a more resilient Canadian economy implies less scarring from the pandemic, which suggests growth can be stronger without becoming inflationary. This offers room for the Bank to maintain monetary stimulus at its current level,” Thanabalasingam wrote.

“Two, even while some areas of the economy are outperforming, others are struggling. Over 500,000 workers have been unemployed for 27 weeks or more, and until these Canadians find new opportunities, inflationary pressures are likely to be modest.”

08/17/2020

Canadian home sales, prices hit record high as low mortgage rates drive buyers into the market by RACHELLE YOUNGLAI
PUBLISHED AUGUST 17, 2020, Globe and Mail

Canadian home sales and prices surged to a record high in July, as buyers flooded the market and took advantage of rock bottom mortgage rates after the new coronavirus pandemic briefly slowed activity in the spring.

Last month, 53,085 homes were sold on a seasonally adjusted basis, up 26 per cent from June, according to the Canadian Real Estate Association (CREA), with Toronto, Montreal and Vancouver soaring along with the surrounding regions such as Hamilton-Burlington in Ontario and Fraser Valley in B.C.

The seasonally adjusted home price index, an industry calculation of a typical home sold, reached a record high of $637,600 last month. That was 2.3 per cent higher over June, the largest month to month increase since early 2017 when real estate markets were on a tear.

Before the pandemic struck in March, Vancouver, most of Southern Ontario, Toronto, Ottawa and Montreal were showing signs of overheating with a shortage of properties triggering bidding wars.

“A big part of what we’re seeing right now is the snap back in activity that would have otherwise happened earlier this year,” Shaun Cathcart, CREA senior economist, said in a statement accompanying the results.

Although the number of new listings is increasing across the country, it is not rising at the same rate as sales, driving competition among buyers.

Now, fresh interest in suburban cities outside of Toronto, along with record low borrowing costs, is fuelling the country’s property market. The popular five-year fixed mortgage is currently below 2 per cent.

In some parts of the country, there is more demand today than before the COVID-19 pandemic.

“I am seeing more homebuyers and more investors than pre-COVID,” said mortgage broker Bernadette Laxamana, president of Karista Mortgage in B.C. “With the rates being so low, it’s costing them less per month to buy and more of their payment is going to principal versus interest,” she said.

07/17/2020

Average Home Prices & Sales Volumes in Ontario in June 2020 (courtesy of Zoocasa)

07/09/2020

Should You Pay Down Your Mortgage?
(by Annalisa Esposito, Morning Star, 9 July, 2020)

Being mortgage-free is a dream many people hold and rock-bottom interest rates might make it easier to achieve. But is it the best way to use your savings?

Canadians are well-known for their love affair with property and owning the roof over your head is a dream that many people share.

Polls have shown that with eating and drinking out off the menu and no overseas holiday on the horizon, lots of us are managing to save more of our cash in lockdown. And with interest rates at record lows, and many of us spending more time at home than ever before, overpaying the mortgage may be on your mind.

A mortgage will be the biggest financial obligation most people ever take on, and the idea of being mortgage-free is undoubtedly appealing. But the jury is still out on whether paying down the mortgage ahead of time is the best way to put your savings to work.

Here are a few questions to ask yourself before paying down your mortgage:

What’s the Interest Rate?

Emma Morgan, portfolio manager at Morningstar Investment Management, believes this is the very first question people should ask themselves. The Bank of Canada recently dropped the central rate of interest to a low of 0.25% and that has an impact on mortgage rates.

Lower rates mean lower monthly repayments and also reduces the amount of interest you pay over the term of the loan. While that may make the "mortgage-free" dream more attainable, Caroline Shaw, head of asset management at wealth managers Courtiers, says it doesn't necessarily mean that's the right option.

“You want to be borrowing when it’s cheap, not saving. Savings rates are horribly low and it’s really difficult to beat inflation with the accounts available," she says. Shaw suggests that, instead of overpaying the mortgage, it may be better to invest the money. It's a riskier option but the theory is that the potential gains you could make while the stock market is rising, outstrip the savings you make by paying down your mortgage while rates are so low.

The next question you should ask is: what is my risk appetite?

Morgan says: "If you are willing to take a risk, then you are probably better off keeping the mortgage if you are paying a very low rate and investing instead." An equity-focused portfolio, she points out, has historically delivered returns of around 5 or 6% a year.

Even taking into account the global financial crisis and the Covid-19 pandemic, the S&P/TSX Composite index has delivered annualised returns of over 6% over the past 15 years, while the S&P 500 has done even better. Shaw says: "If you had used your money to overpay your mortgage rather than invest in the stock market, you would have missed those gains."

She believes younger generations in particular should prioritise Isa investing over mortgage overpayments, given that they have such a long time horizon. “If you are young, equities are the place to be," she says. “If you are far away from retirement, you don’t want to put your money in cash, you put it in the stock market. It might feel uncomfortable, but it is the most sensible decision.”

Could You Do Something Else With the Money?

Of course, there aren't just two options when it comes to where to put your money. Rather than investing or paying the mortgage, some advisers point out it's important to enjoy yourself and spend some cash on experiences too.

Shaw says: "My oldest son is 16, he won't be coming on holidays with me for many more years so I want the ones we have together to be absolutely superb. We’re going skiing next year, if Covid permits travel. I’d rather go to France skiing than paying my mortgage.”

There are also practicalities to consider. Many financial advisers suggest having at least three months' salary saved in case of an emergency or unexpected expense. Anyone with expensive credit card or loan debt should also prioritise these payments, where the interest can quickly rack up.

Shaw adds: "Ultimately, it’s about finding a good balance between living your life and paying down your debt.”

Can You Sleep at Night?

One of the reasons working out your risk appetite before investing is so important is that it is not supposed to be a stressful experience. A cautious investor with 100% of their portfolio in racy emerging markets stocks may have a lot of sleepless nights.

But the same philosophy applies to the rest of your finances, too. Many savers may prefer the certainty of paying down their mortgage debt and owning their own home over the potential rollercoaster ride of the stock market, even if the potential gains are greater.

"If anything, the recent crisis has reminded us that our health and wellbeing are really the most important things in life," adds Morgan. "By developing a sensible financial plan tailored to your goals and risk tolerance, and having the fortitude to stick to that plan - even through tumultuous periods - you can sleep well at night and focus on what really matters."

07/09/2020

The Average Price of a Toronto Home Hit an All-Time High in June (by Toronto Storeys)

According to the latest info from the Toronto Regional Real Estate Board (TRREB), the average price of a Toronto home in June was $930,869 – an all-time high that surpasses the previous record set three years ago.

That previous record, set in April 2017, peaked at $920,791, before stricter rules for mortgages and foreign buyers temporarily cooled the market down. According to TRREB’s latest report, prices were up across all housing types; however, detached properties were up 14% and semi-detached properties led the way by rising an astounding 22% – up to an average of $1,287,832.

Again, the average selling price of a semi-detached home in Toronto last month was just 12 grand short of $1.3M. Looking for a detached home? That average is now $1.52 million, up 14.3% y-o-y.

“Following the broader movement to reopen the economy in June, we experienced a very positive result in terms of home sales and selling prices,” said TRREB president Lisa Patel in a statement. “Before the onset of COVID-19, there was a great deal of pent-up demand in the market. This pent-up demand arguably increased further over the past three months.”

However, it is important, as John Pasalis, president of Realosophy, points out, to keep in mind that average prices pushing to a new record high very likely isn’t the “new normal,” rather it could easily represent a short term demand shock that was caused by the housing market nearly shutting down in its entirety for 2.5 months during the height of the pandemic.

As COVID unfolded and emergency orders were enacted, potential buyers stepped back to the sidelines, as did most of those planning on selling their homes. But now that Toronto is in the midst of Stage 2, people appear to be feeling more confident about looking for – and buying – properties again.

In fact, it’s clear that both buyers and sellers have enthusiastically resumed activity in the market, as is evident from the amount to which Toronto home sales rebounded in June, in turn helping to push the average price of a Toronto home to a new all-time high.

Pasalis compared this situation to what’s currently happening to hair salons: “Thousands of people need a haircut. Hair salons are booked till the end of August. It does not mean that this level of demand is typical for the hair salon business – it is a demand shock caused by COVID.”

Pasalis expects the same thing will happen for the Toronto housing market. As more buyers and sellers return to the market, prices could potentially continue increasing through July.

It is impossible to say right now whether or not the current demand in the market will last. And with a looming “deferral cliff” combining with the end of CERB and the potential for millions of people to remain out of work, it would be difficult to conclude that the market won’t be affected. And yet, if you’d asked anyone three months ago (hell, even two months ago) if we’d be seeing this kind of competition by the end of June, you would have been hard pressed to find someone willing to bet the farm that we would be.

People have been waiting for the Toronto housing bubble to burst for years now. Nearly four full months into a pandemic that has left much of the world’s economy on its knees, it looks like they’re going to have to keep waiting.

01/29/2020

Are Changes to the Stress Test Qualifying Rate Coming?

(by Steve Heubl, Mortgage Broker News January 29, 2020)

The use of Canada’s benchmark rate in administering the mortgage stress test is currently under review, according to an official with the Office of the Superintendent of Financial Institutions (OSFI).

In a speech to the C.D. Howe Institute, Ben Gully Assistant Superintendent, Regulation Sector, said the use of the benchmark qualifying rate as the floor of Guideline B-20 stress testing for uninsured mortgages is “not playing the role that we intended.”

Uninsured mortgages (those with less than 20% down payment) are currently stress-tested on the higher of the borrower’s contract rate plus 200 bps, or the benchmark rate, which is currently 5.19%.

“For many years, our data showed the difference between the benchmark rate and the average contract rate was about 2%. This provided a healthy buffer,” Gully said. “However, the difference between the average contract rate and the benchmark has been widening more recently, suggesting that the benchmark is less responsive to market changes than when it was first proposed.”

Indeed, fixed mortgage rates have been on a downward trajectory since the beginning of 2019.

What likely won’t be changing is OSFI’s use of the contract rate plus 200 basis points for stress testing uninsured mortgages. “This helps borrowers and lenders manage a sudden change in circumstances such as an income loss, increased interest rates, and/or additional expenses,” Gully said. “This will therefore remain a key part of OSFI’s guideline B-20.”

Gully added that “while we are aware of contrary opinions, “institutions, markets and borrowers have all come to see the value of a qualifying rate even if there remains debate about the appropriate level of responsiveness.”

“It’s an interesting acknowledgement [by OSFI] that the BoC posted rate is now possibly too stringent a test given our market rates,” Paul Taylor, President and CEO of Mortgage Professionals Canada told CMT. “This is very encouraging for the marketplace and own lobby efforts.”

In his speech, Gully also provided OSFI’s take on other aspects of the mortgage industry.

On renewals…

For mortgage renewals, existing lenders don’t typically re-underwrite the loan if the borrower is current with their payments. “OSFI sees this as a reasonable practice…” Gully said. “However, we do expect lenders to update their risk analysis throughout the life of the loan.”

“We will continue to look at this issue closely through regular reporting on rates for new originations and renewals,” he added. “If we see outliers, then we will follow up directly with lenders to understand why this is happening and what they are doing about it.”

On HELOCs…

OSFI recognizes that combined loan products, such as HELOCs, “can make adding more risk easy for borrowers,” Gully said, adding that, “OSFI is concerned that some lenders may be taking on more risk than they bargained for with these open-ended commitments.”
The problem, he noted, is that loan products such as HELOCs can conceal increasing debt loads while payments remain the same.

“This can make assessing credit quality more difficult for lenders,” he said. “We are working with the Bank of Canada to collect data to assess the potential vulnerabilities of these products as well as the larger market and economic issues.”

03/19/2019

Federal budget includes first-time buyer incentives
by Canadian Press 19 Mar 2019

OTTAWA _ On the eve of a federal election this fall, the Liberal government is looking to help more Canadians buy their first homes by picking up a portion of their mortgage costs and increasing the amount they can borrow from their retirement savings for a down payment.

Helping people enter the housing market has been a growing preoccupation for the Liberals ever since they were elected in 2015, with soaring real-estate prices in some of Canada's largest cities putting home ownership beyond the reach of many.

An estimated 1.6 million Canadian households are considered in ``core housing need,'' meaning people who are living in places that are either too expensive or don't suit their needs.

The means-tested incentive the Liberals unveiled Tuesday would only be available to households with incomes under $120,000 _ roughly $50,000 more than the median household income as calculated by Statistics Canada _ and on mortgages no more than four times the household's total income.

Eligible buyers would see the government pick up part of the costs of their mortgages to lower their monthly payments, with the amount of help determined by their incomes and whether they're buying an existing or newly built home.

The government also plans to raise the maximum amount a first-time buyer can withdraw from an RRSP: $35,000, up from $25,000. And while the program has long been restricted to new would-be homeowners, those who are recovering from the breakup of a marriage or common-law relationship would also be allowed to take part.

The measure, expected to cost $1.25 billion over three years beginning this fiscal year, would target Canadians ``that face legitimate challenges entering housing markets'' after qualifying for a mortgage, the budget document says. An additional $100 million would flow to the Canada Mortgage and Housing Corporation to help organizations that already provide the so-called ``shared equity mortgages.''

The government would recoup its costs when the house is sold, although the budget document isn't clear what would happen if the home is sold for a loss.

The program, some details of which are yet to be finalized, is part of a tranche of spending that includes establishing a national expert panel on housing supply and affordability, better data collection, and $300 million for a contest to encourage cities to come up with new ways of expanding housing stock.

The new measures could increase the annual number of new homebuyers nationally to 140,000 from 100,000 by lowering monthly payments without creating higher household debt loads, said Finance Minister Bill Morneau, who was confident the measures won't cause a spike in housing prices.

``We're recognizing that it is challenging for people in the housing market; it's a real issue, but what we've done is we've carefully looked at what's the best way to deal with that issue,'' Morneau told a news conference.

``It's not going to make an impact on the overall market from a pricing standpoint, meaning people are actually going to be better off, more optimism in terms of housing, and it's the reason we're very excited about this measure.''

Economists and experts had been concerned that Morneau's focus on helping millennials, in particular, get footholds in the market could juice home prices after years of trying to cool demand in places like Toronto and Vancouver. Federal efforts, such as a new financial ``stress test'' to make sure a buyer can afford a mortgage, have slowed prices from where they might have been.

Scotiabank economist Marc Desormeaux said the Liberals opted for a relatively modest measure, considering the options they have.

``This is providing additional support for individuals who have already qualified for homes, helps them relieve some of their monthly payments once they've qualified for a mortgage and entered into the contract,'' Desormeaux said.

``The concerns about stoking demand from some of these measures aren't concerns that we would raise at this time.''

What the measures should do is increase supply _ one of the measure's stated goals. The government plans to cover five per cent of the cost of the purchase of an existing home and 10 per cent of a new build, hoping to ``encourage the home construction needed to address some of the housing supply shortages'' across the country, the budget document says.

Mathieu Laberge, an expert with Deloitte, said the measures appear to target people who would be willing to rent or buy smaller condominium units, for example, outside a major urban centre.

``It may shift the decision-making of some buyers in larger cities,'' said Laberge, a former policy adviser to Social Development Minister Jean-Yves Duclos. ``You're changing the relevant price between rental and home ownership in those areas, like the immediate suburbs of, for example, Vancouver and Toronto, which is a way to provide more options to households that would otherwise be priced out of the market.''

Tuesday's budget also includes $10 billion more for a program to fund the construction of new rental units _ the third time the Liberals have expanded the program, which aims to create 14,000 units over 10 years and now carries a $50-billion price tag.

The Canadian Press

Frank Nuguid at The Mortgage Centre

02/08/2022

05/21/2021

03/11/2021

08/17/2020

07/17/2020

07/09/2020

07/09/2020

01/29/2020

03/19/2019

Address

Website

Alerts

Contact The Business

Shortcuts

Share

Category