First-time homebuyers program still short homebuyers

General Joanna Yang 21 Jun

First-time homebuyers program still short homebuyers

The federal government’s program to help first-time homebuyers is still helping far fewer Canadians than the program is supposed to, according to figures tabled in Parliament on Thursday.

The three-year, $1.25-billion first-time homebuyers program launched on Sept. 1, 2019, and is run by the Canada Mortgage and Housing Corporation (CMHC).

As of March 31 — halfway though the program’s lifespan — just $178 million had been doled out to 9,804 buyers, the data show.

Most successful applications were for mortgages valued between $150,000 and $350,000, well below the average selling price in Canada’s biggest cities.

When first announced, federal officials said the program could help as many as 100,000 Canadians. The incentive is in the form of a shared-equity mortgage. Qualified applicants can borrow either five or 10 per cent of a home’s purchase price and put the money toward a down payment, which can help lower monthly payments.

In order to qualify in most areas, applicants must earn less than $120,000 a year. The total value of the mortgage is capped at four times the prospective buyer’s annual income. In an attempt to boost uptake in major cities with high housing prices, the fall economic statement expanded eligibility in Vancouver, Victoria, and Toronto.

For buyers in those three census metropolitan areas (CMAs), the eligibility limit was increased. As of May 3, when the changes were implemented, the income cap was raised to $150,000, and the total value of the mortgage was allowed to be 4.5 times annual household income, instead of just four times in all other CMAs.

In May, the average home price in the Greater Vancouver Area was nearly $1.2 million, and over $800,000 in Victoria, both representing a year-over-year increase of more than 14 per cent. In the Greater Toronto Area, the average price was over $1 million, a nearly 19 per cent year-over-year increase, according to data from the Canadian Real Estate Association.

The changes in the economic update aren’t reflected in the recently tabled data, which cover only up to March 31. A spokesperson for Children, Families, and Social Development Minister Ahmed Hussen said it’s difficult to estimate the impact of the changes at this time, but Hussen expects they will “increase the number of eligible first-time homebuyers by several thousand.”

Most successful applicants — nearly 3,800 — are in Quebec. Albertans come in second, with just over 2,800 successful applicants. In British Columbia and Ontario, the two provinces with the hottest housing markets, each has had just 342 and 770 successful applications, respectively.

The new data show how unpopular the program has been in those cities. Just five homebuyers have qualified for the program in Victoria, nine in Vancouver, and 39 in Toronto. The program is most popular in Edmonton (1,288 successful applicants), Calgary (636), Winnipeg (446), Quebec City (419), Montreal (274), Halifax (259), and Saskatoon (200).

Similar figures were tabled in April for the period ending Jan. 31, 2021. At that time, $170 million had been dispersed to 9,108 applicants.

READ MORE: Few first-time homebuyers have qualified for federal incentive

The Conservatives recently urged the government to scrap and replace the program through an opposition-day motion, but didn’t propose an alternative, nor say how they’d fix the program. Conservative Housing critic Brad Vis said his party will release a detailed housing policy in the party’s next election platform, but the details haven’t yet been ironed out. One proposal he’s putting forward, similar to what the Tories promised in their 2019 platform, is to apply the mortgage-amortization rate for longer than its current 25 years.

Data released by Statistics Canada on Friday show Canada’s housing market continued its hot streak, with national prices up 1.4 per cent from April to May. Prices were also up in 19 of the 27 CMAs studied. Winnipeg led the way with a 5.1 per cent jump from April to May. Calgary was also hot, with a 3.7 per cent month-to-month increase, its fastest since July 2006. Lack of supply, rising construction costs, and a jump in the price of building materials such as lumber are contributing to the rise, StatCan said.

“With these massive price increases, we’re seeing a social divide emerge,” Vis told iPolitics on Friday. “Our economic system in Canada has been predicated on a pathway to home ownership, in large part. I don’t believe we should just give up on that ideal right now.”

Nationally, prices were up 11.3 per cent year-over-year in May, the biggest increase since November 2006, StatCan said. Prices were up in all 27 CMAs surveyed, with Kitchener-Cambridge-Waterloo, Ont., leading the way with a 27 per cent increase; Ottawa following with 25 per cent; then Windsor, Ont., with 21 per cent.

The Canadian Real Estate Association estimates that the national average home price will increase to just over $677,775 in 2021, with the average price in Ontario and B.C. nearing $800,000.

The Slowdown In Canadian Housing Continued in May

General Joanna Yang 17 Jun

The Slowdown In Canadian Housing Continued in May
Today, the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 7.4% nationally from April to May 2021, building on the 11% decline in April. Over the same period, the number of newly listed properties fell 6.4%, and the MLS Home Price Index rose 1.0%, a marked deceleration from previous months.

Activity nonetheless remains historically high, but in contrast to March’s all-time record, it is now running closer to levels seen in the second half of 2020 (see chart below). Month-over-month declines in sales activity were observed in close to 80% of all local markets. It was a mixed bag of results, with a slowdown in sales observed in most large markets across Canada.

“While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices,” stated Cliff Stevenson, Chair of CREA. “More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID would also be expected to fade at this point given where we are with the pandemic”.

New Listings

The number of newly listed homes declined by 6.4% in May compared to April. New listings were down in about 70% of all local markets in May.

The national sales-to-new listings ratio was 75.4% in May 2021, down slightly from 76.2% posted in April. The long-term average for the national sales-to-new listings ratio is 54.6%, so it remains historically high; although, it has been moderating since peaking at 90.7% back in January.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about a quarter of all local markets were in balanced market territory in May, measured as being within one standard deviation of their long-term average. The other three-quarters of markets were above long-term norms, in many cases well above.

As the chart below shows, Edmonton was one market in balance, and the Greater Vancouver Area was moving closer to balance, but others remain a seller’s market.

There were 2.1 months of inventory on a national basis at the end of May 2021, up from a record-low 1.7 months in March but still well below the long-term average for this measure of over 5 months.

Home PricesThe Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 1% month-over-month in May 2021 – a noticeable deceleration. The most recent deceleration in month-over-month price growth has come from the single-family space compared to the more affordable townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 24.4% on a year-over-year basis in May. Based on data back to 2005, this was another record year-over-year increase; although, it is not likely to go much higher.

While the largest year-over-year gains continue to be posted across Ontario, this is also where month-over-month price growth has been slowing the most. Meanwhile, price growth has continued to accelerate in some other parts of the country, thus reducing the year-over-year growth disparity between Ontario and other provinces.

Bottom Line

The near-uniform nature of the housing market activity (in what is usually a highly regionalized market) is still a key feature of this cycle. Indeed, 22 of 26 markets tracked by CREA saw sales fall in May, while all but one market saw the average transaction price up by double-digits from a year ago (sorry, Thunder Bay). Among the tightest markets in the country based on the sales-to-new listings ratio are the Okanagan and Kawartha Lakes; cottage country is still on fire.

The two-month slowdown in Canadian housing is welcome news. The OECD recently released a report showing that New Zealand, Canada and Sweden have the frothiest housing markets in the world. The UK and the US are near the top as well. Clearly, COVID led many around the world to alter their abode, driving prices higher almost everywhere.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

Starting to See a Slowdown in Canadian Housing

General Joanna Yang 17 May

The Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 12.4% nationally from March to April 2021. Over the same period, the number of newly listed properties fell 5.4%, and the MLS Home Price Index rose 2.4%.

While home sales fell month-over-month in April, largely due to the new lockdowns, April sales were still the strongest ever for that month and well above the 10-year monthly average.

Month-over-month declines in sales activity were observed in close to 85% of all local markets, including virtually all of B.C. and Ontario.

New ListingsThe number of newly listed homes declined by 5.4% in April compared to March. In a market with historically low inventory, where sales activity depends on a steady supply of new listings each month, the synchronous gains in new supply and sales in March followed by synchronous declines in April suggest the slowdown in sales may be partially about the availability of listings as opposed to only a demand story. New listings were down in 70% of all local markets in April.

The national sales-to-new listings ratio eased back to 75.2% in April compared to a peak level of 90.6% back in January. That said, the long-term average for the national sales-to-new listings ratio is 54.5%, so it is currently still high historically. The good news is that it is moving in the right direction.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about a quarter of all local markets were in balanced market territory in April, measured as being within one standard deviation of their long-term average. The other three-quarters of markets were above long-term norms, in many cases well above.

There were 2 months of inventory on a national basis at the end of April 2021, up from a record-low 1.7 months in March but still well below the long-term average for this measure of a little more than 5 months.

In a separate release, Canadian housing starts fell to 268,600 annualized units in April from the blowout (334.8k) month in March. While down sharply month-over-month, this is still a solid level of new construction activity in Canada by historical standards. In fact, average annualized starts over the past six months run at the strongest level on record, topping building booms in the 1970s and 1980s. All regions but the Prairies and Atlantic Canada saw lower starts in April.

Home PricesThe Aggregate Composite MLS® Home Price Index (MLS® HPI) climbed by 2.4% month-over-month in April 2021 – a historically strong gain but less than in February and March. Most of the recent deceleration in month-over-month price growth has come from the single-family space compared to the more affordable townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 23.1% on a year-over-year basis in April. Based on data back to 2005, this was a record year-over-year increase.

The largest year-over-year gains continue to be posted across Ontario (around 20-50%), followed by markets in B.C., Quebec and New Brunswick (around 10-30%), and lastly by gains in the Prairie provinces and Newfoundland and Labrador (around 5-15%).

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 home price was slightly under $696,000 in April 2021, up 41.9% from the same month last year. That said, it is important to remember that the national average price dropped by 10% month-over-month last April as the higher-end of every market effectively shut down for a couple of months. That will serve to stretch these year-over-year comparisons over and above what is actually happening to prices until around June.

By segment: Single-detached remains extremely strong, but earlier signs that condo markets in the large cities were tightening up continue to play out. Condo prices were up 8.5% y/y in April, the strongest pace since mid-2018, and price gains are now running even stronger month-to-month in the biggest cities. We continue to expect these markets to come back stronger than most might think.

By region: It’s as close to wall-to-wall strength that we’ve probably ever seen in this country. Long-dormant markets like Calgary and Edmonton are awake again with prices up roughly 9% y/y; Toronto, Montreal and Vancouver remain strong as usual; some smaller markets (think Halifax, Moncton, Southwestern Ontario) are even stronger than the big cities; and cottage country is booming.

Bottom Line

Headlines will probably flag housing market declines in April, but don’t that fool you…this market is still robust across geography and segment, even if we’ve likely seen peak momentum. Activity will likely remain strong this summer, especially if the COVID restrictions are eased, and people begin to get their second vaccine.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

拿到Commitment Letter就等于贷款批下来了吗? No!

General Joanna Yang 29 Apr

很多人认为按揭贷款拿到了Commitment letter 就大功告成了, 其实只不过是刚刚走过了整个流程的50%而已。 接下来银行风控要审阅所有收入、信用相关的文件和房子的正式评估报告等文件, 过了文件审阅和房屋评估这两关,才算是贷款正式被批了。

对于首付低于20%的按揭贷款,都需要购买房贷保险。要注意的是,按揭审批流程需要要走两遍 — 银行走一遍, CMHC等保险公司也要走一遍独立的批准流程,以确保每一笔首付低于20%的按揭贷款符合保险公司的获保条件。

警报!如果你的房子存在以下的情况, 很可能在最后一分钟被告知无法获得贷款的批准 –

  1. 因太多的人哄抢offer, 造成房屋的成交价格过高, 脱离市场实际价值;
  2. 房屋内部实际情况糟糕, 特别是在MLS listing上出售时出现 “as-is” 或者“handyman special?” 等字眼, 都是银行风控高度关注的敏感词语;
  3. 如果所买的自住房和申请人工作地点离的非常远, 银行会觉得不符合实际生活常理,会假设申请人会有花费在第二个住处上, 而强制要求在计算申请人的“负债收入比(TDSR)”时加上“Shelter Cost”作为负债项。 各个银行对Shelter Cost要求不同,有的要求$400, 有的要求$600等等。 这个Shelter Cost一旦被要求加上,经常会让申请人的TDSR一下子爆掉。所以在买自住房申请贷款时,申请人一定要注意和自己工作地点必须有一个合理的距离。
  4. 买Condo的时候, 要注意如果Condo的管理费出奇的高,或有些特殊的情况如水管是Kitec Plumbing, 银行都会拒绝贷款。 另外要注意Condo的面积, 很多银行要求Condo的面积不能小于500平尺,过小的Condo银行会拒贷。

A Pre-Approval Does Not Guarantee a Mortgage Approval

General Joanna Yang 28 Apr

A Pre-Approval Does Not Guarantee a Mortgage Approval

by Ross Taylor

Many Canadians are under the assumption their mortgage is as good as done once they have a mortgage pre-approval.

But the truth is a buyer cannot expect a mortgage pre-approval will automatically translate into a mortgage. The lender now needs to consider the property itself, approve all the terms and review the documentation before you transition from pre-approved to approved.

Buyers often do not appreciate there is still some uncertainty when it comes to their mortgage. Unfortunately, once in a while this uncertainty bites back – with calamitous consequences.

Going in Without Conditions in a Hot Market

Not that long ago, when housing supply equalled or exceeded demand, the buyer would insert a clause requesting five business days (usually) to arrange mortgage financing – this is called a “condition of financing.” Even one or two days can make a world of difference.

These days across much of Canada, residential real estate is such a hot commodity it’s more likely offers to purchase will be firm and without a condition of financing.

The process is very skewed in favour of sellers at the moment, and it’s really not a comfortable or fair situation for the buyer. The fact of the matter is homebuyers, especially first-time buyers, are taking this risk every day. In many markets, it’s the only way you will win in a multiple-offer situation.

It is clearly in the buyers’ best interests to know in advance how much mortgage they might qualify for. This is achieved by providing complete information and documents to your bank or mortgage broker and allowing them a deep-dive into your personal finances and credit. They can then underwrite your application upfront.

Even when a thorough review has been conducted, and you are clutching a pre-approval certificate, there are many things that could happen to compromise your home purchase.

Insured Mortgage Approval

Suppose you are in line for an insured mortgage, which is always the case with less than a 20% down payment. Your mortgage approval is technically approved twice – first by the lender and then by the insurer. And please understand that no mortgage insurer has seen your pre-approval request.

The pre-approval considers your personal creditworthiness and borrowing capacity. The actual amount you qualify for also depends on the property itself: that plus the lender and insurer’s assessment of your application. Please remember, pre-approvals do not consider the specific properties.

Reasons Why the Property Can Hurt Your Mortgage Approval

To secure a mortgage, the borrowers and the property have to pass muster. No one knows the exact property you are going to buy when you are pre-approved. When it comes time for the lender to approve your mortgage, there are many ways the specific property can impede the approval.

There are several reasons why a specific property can cause concern. For more information, we defer to Dustan Woodhouse, whose passionate concern for this topic inspired this article and who lists many more here.

  1. Value of The Home: When multiple buyers are competing on the offer presentation day, there can only be one winner. In this market, the winner often has to bid much more than the market value. When this happens, the appraisal may come back with a value less than you paid. That will not necessarily kill your mortgage approval, as long as you have additional financial resources to cover the shortfall, if necessary. Note: This market does not favour buyers who go in subject-free (firm) with no wiggle room. If you are using all your financial resources to come up with the down payment and closing costs, what can you do if the value comes back lower?
  2. Property Condition: Have you ever seen an MLS listing that says “as-is” or “handyman special?” Those are red flags to a lender, and a mortgage may not be forthcoming at all. The appraisal may further report poor conditions, mold or even structural issues.
  3. Property Specifics: There are many reasons a property may prove challenging. Here are some examples of property types that will seem problematic to a lender:
    • Log homes
    • Homes on leased land, First Nations, government or private
    • Rural properties with a hint of hobby farming
    • Properties containing asbestos, underground oil tanks, aluminum wiring
    • The remaining economic life of the property
    • Suppose the property was a one-time grow-op or drug lab. Good luck with that – no matter the price you pay, even if the property has been remediated.
    • One property earlier this year had an MLS listing that proudly mentioned a 15-foot fish pond in the backyard – with a fish farm permit. That mortgage was VERY hard to place.
  1. Location: If a lender feels the property you picked is simply too far from your workplace, they may assume you need to keep a second home or place to stay, and in such cases they impute a “shelter cost” for you. This might also skewer your approval.
  2. Condos: Mortgage insurers keep lists of condo buildings they do not want to lend against. Maybe the maintenance fees seem extraordinarily high or the condo status certificate reveals significant assessments; for example, something like Kitec Plumbing.

    The smaller the condo is means fewer interested lenders
    . Many lenders simply do not like to lend against micro-condos. Condos under 500 square feet are often a cut-off, but in recent years that number has shrunk to 400 SF or less with some lenders. It might depend if the unit has a separate bedroom. In some of these suites, the bedroom is a wall bed/Murphy bed.

home appraisal

Reasons Why You Might Hurt Your Own Mortgage Approval

Your mortgage may not be approved because of something to do with you, the borrower. Either something material has changed in your circumstances or new information has come to light, which changes the lender’s view of you.

The golden rule is to be very wary of change during the home-purchasing process. A shiny new car in the driveway or a new job might completely cast things in a different light.

Earlier this year, one of our clients quit his job and became a freelance contractor after their firm offer was accepted. This was a problem because now he is considered self-employed. Such income is assessed differently during the mortgage underwriting process. Typically, you will need to show two years of operating success to qualify for your mortgage.

We managed to save the mortgage, but only because the employed partner’s income was so high. This change from salaried employee to self-employed could have been disastrous for this couple.

You want to be sure your personal taxes are up to date and in good standing with CRA. You must also pay all of your credit card bills on time and ensure you do not miss any payments.

It is definitely not a good time to defer loan payments of any kind. Even though mutually agreed payment deferrals do not adversely affect your credit score, mortgage lenders might think twice about lending a considerable amount to someone who needs relief from their financial obligations.

The Takeaway

When you and your real estate agent are honing in on a specific property, make sure to first circle back to your mortgage broker and ask them to input the property’s specs into your application.

Clarify and understand the strength of your mortgage pre-approval. What factors might result in a mortgage offer for a reduced loan amount, or worse, not being extended an offer at all?

Take stock of your personal finances. Understand from your mortgage broker where your debt service ratios are at, and if your credit history and employment situation are still acceptable. Ensure your income is well understood – especially if you earn overtime, bonuses, commissions or have irregular hours.

If you are buying a condo, ask your real estate lawyer to carefully review the condo status certificate in advance and report any and all items of interest to you.

If you are buying a rural property, make sure your Offer to Purchase addresses the septic system and water potability. And check the zoning!

Insist your realtor provide you with an up-to-date market analysis of the property’s value and assess your ability to weather a lower-than-expected appraisal value.

An experienced mortgage broker can often tell whether or not your mortgage approval would be at risk and can help you assess when it is a risk worth taking. They can tell you the potential concerns so you can make an educated, informed decision to proceed with your offer to purchase.

At the end of the day, this decision is all on you, the buyer. You need to make a fully informed decision if you choose to go firm with your offer.

Canadian rents came down, but that’s about to change

General Joanna Yang 22 Apr

A funny thing happened during the housing boom – thousands of tenants decided this was the time to stop paying rent and start paying a mortgage.

With interest rates low and house prices skyrocketing with each monthly update, there’s been a steady stream of moving trucks from densely-packed apartment towers to the relatively leafy, spacious suburbs. And the renters who would usually replace the vacating tenants aren’t standing by ready to move – they are staying put until things settle.

This has been good news for real estate agents who love to sell to first-time buyers. It’s been good news for anyone able to afford a house. And it’s been good news to anyone moving into a new rental because rents dropped across the country last year with tenants leaving their units to move to their new owned-homes.

It hasn’t been so great for landlords, of course, but a recent report suggests the bottom may have been reached, and rents will start climbing again for the rest of the year.

Here are five things about Canada’s rental market.

1 – Back to the city

When the pandemic really started to make itself known, columnists wrote thousands of words about the demise of downtown living. Things got so out of hand that Jerry Seinfeld wrote a scathing rebuttal in the New York Times, telling anyone who thinks leaving the city will make their lives better should hurry up and go (and never come back).

“You say New York will not bounce back this time,” he wrote. “You will not bounce back. In your enervated, pastel-filled new life in Florida. I hope you have a long, healthy run down there. I can’t think of a more fitting retribution for your article. This stupid virus will give up eventually. The same way you have. We’re going to keep going with New York City if that’s alright with you.”

A report from Bullpen Research and Consulting would suggest Jerry was on to something. Analyst Ben Myers said people seem to be reconsidering their previous thoughts on the joys of country living.

“Anecdotal evidence from leasing agents suggests that rental demand is increasing in the downtown areas of Canada’s major cities as tenants look to get in at the bottom before rents rise in conjunction with the rise in vaccine distribution.”

2 – Regional differences are important, but…

Canada is a huge country with many regional differences, so it’s kind of silly to talk about the “Canadian Rental Market,” but you do get a sense of what’s happening by taking the big picture view sometimes.

Rents decreased by 8.5 per cent in March compared to the previous March, to an average of $1,685 (that’s $157 lower). While the prices are different in every market, the trends that drove down demand were consistent.

“The pandemic has been with us for more than a year now and has had a dramatic impact on the rental market in Canada,” the report from Bullpen Research and Consulting found. “With few immigrants, few students moving close to school, and few recent graduates moving closer to their first jobs, demand has fallen dramatically.”

3 – 2020 was tough all around

A CMHC report that looked back on 2020 says Canadians found it challenging to pay the rent through the last year. Apartment-building owners reported a 58 per cent increase in arrears from the year before – with total unpaid rent estimated at $150-million.

Things were especially tough for families earning less money – the most affordable units also had the lowest vacancy rates. Less than 1 per cent of rental units in Vancouver and Toronto would be considered affordable to low-income renters.

“The results show that vacancy rates are generally lower for the most affordable units (due to higher competition),” CMHC said. “These units tend to be smaller (predominantly bachelor or 1-bedroom units). Both of these realities raise additional challenges for lower income households, particularly for families requiring more space.”

4 – Rents on the rise?

While rents declined significantly over the last year, researcher Ben Myers said there were signs things were looking better (from a landlord perspective) for the first time in a year.

“There were some signs that the rental market might have bottomed out, as the average rent in Vancouver, Toronto, and Montreal increased in March over February this year,” he said.

As lockdown drags on and schools remain closed, some tenants are moving to larger units. They wouldn’t have been able to afford this last year when rents were higher.

Vancouver is the priciest rental market in Canada, with prices up 2 per cent year-over-year to $2,598 for a two-bedroom rental. Toronto was next with a 0.5 per cent decline at $2,370, while Montreal saw a 3.9 increase to $1,947.

Anyone looking for a deal could take a peek at Saskatoon, which sits at the bottom of the 35 city rankings at $1,021.

5 – But what about house prices?

Anyone who held their breath waiting for the country’s housing bubble to burst would be long dead, but the government is once again trying to cool things down. This time it’s through a foreign buyers tax intended to keep speculators from sitting on empty properties.

But anyone engaged in a bidding war over the last couple of months was likely bidding against their neighbours and friends, not a ghostly spectre from another country nefariously bidding high and then disappearing to their homelands.

UBC professor Paul Kershaw said the measures don’t do enough and do nothing to address more significant, homegrown problems in the market that keeps prices moving higher.

“The [federal] budget does relatively little to reduce wealth inequalities that are emerging between older and younger generations as a result of the ongoing rise in home prices, which have skyrocketed once again during the pandemic,” said Kershaw.

The Canadian Real Estate Association said a lack of listings was behind last year’s increases. Still, the spring has seen more houses hit the market. March set a new record for the number of homes sold at 76,259. The average price was $716,828 – up 31.6 per cent from the same month last year.

It’s almost enough to make you want to rent a cabin in the woods to get away from it all, if they weren’t so expensive too.

Bank of Canada Scales Back Bond Buying

General Joanna Yang 21 Apr

Bank of Canada Scales Back Bond Buying
Today, the Bank of Canada held its target for the overnight rate at the effective lower bound of ¼ percent. The Bank is also adjusting its bond-buying program from weekly net purchases of Government of Canada (GoC) bonds of $4 billion to $3 billion. This adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.

Finally, the Bank now suggests that the remaining slack in the economy could be fully absorbed by the second have of 2022–rather than 2023, suggesting that they may begin raising overnight interest rates before the end of next year. The Bank went on to aver that this timing is more uncertain than usual, however, given the uncertainty around potential output and the highly uneven impacts of the pandemic.

The Bank of Canada now believes that first-quarter growth in Canada is considerably stronger than they were expecting back in the January Monetary Policy Report (MPR). This partly reflects a better global backdrop, particularly in the United States. The US recovery is supported by a rapid rollout of vaccines and substantial fiscal stimulus, bringing spillover benefits to Canada through higher demand for exports and stronger commodity prices.

“But the most important factor in the unexpected economic strength has been the resilience and adaptability of Canadian households and businesses. Lockdowns through the second wave had much less economic impact than they did through the first wave. The economy bounced back quickly with the eased restrictions posting substantial job gains in February and March. The third wave is a new setback, and we can expect some of these job gains to be reversed. But the performance of the economy in recent months has increased our confidence in the underlying strength in the recovery.”

The Bank went on to say, “With the vaccine rollout progressing, we are expecting strong consumption-led growth in the second half of this year. Fiscal stimulus from the federal and provincial governments will also make an important contribution to growth. Strong growth in foreign demand and higher commodity prices are expected to drive a solid rebound in exports and business investment, leading to a more broad-based recovery. Overall, we now project that the economy will expand by around 6½ percent this year, slowing to about 3¾ percent in 2022 and 3¼ percent in 2023.

Over the next few months, inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range. This is largely the result of base-year effects—year-over-year CPI inflation is higher because prices of some goods and services fell sharply at the start of the pandemic. Also, the increase in oil prices since December has driven gasoline prices above their pre-pandemic levels. The Bank expects CPI inflation to ease back toward 2 percent over the second half of 2021 as these base-year effects diminish, and inflation is expected to ease further because of the ongoing drag from excess capacity. As slack is absorbed, inflation should return to 2 percent on a sustained basis sometime in the second half of 2022.

Bank of Canada “Forced” To Taper

When the pandemic first hit, the BoC bought government securities, providing liquidity to assure the full functioning of the market. As liquidity conditions in the  Government of Canada (GoC) bond market improved, the primary objective of central bank bond purchases shifted toward a focus on monetary stimulus. The quantitative easing (QE) purchases of bonds continue to put downward pressure on borrowing rates, supporting economic activity. QE also reinforces monetary stimulus provided by the Bank’s forward guidance. This guidance has committed to holding the policy interest rate (the overnight rate) at its effective lower bound until economic slack is absorbed, so the inflation target is sustainably achieved.

The Bank’s total ownership of GoC bonds outstanding has increased to about 42 percent. Since March 2020, the Bank has purchased more than 35 percent of total sovereign bonds outstanding, a higher percentage than other central banks (see chart below). Considering the size of Canada’s bond market and its economy, this means that the Bank has provided an extraordinary amount of stimulus. The Bank must continue to taper its purchases to ensure sufficient tradeable GoCs are available for longer-term institutional investors–such as insurance companies and pension funds–that must hold triple-A debt to offset their long-term liabilities.

Bank of Canada Assessment of the Housing Market

In today’s MPR, the Bank of Canada included an assessment of the drivers of the strength in Canadian housing:

  • Demand has been supported by relatively high disposable incomes and low mortgage rates.
  • While job losses have risen during the pandemic, they have been concentrated among low-wage earners who tend to rent their homes rather than buy them.
  • Remote work and more time spent at home have led to stronger demand for larger, single-family homes and housing in suburban and rural areas.
  • One implication of this shift in demand is a pickup in new housing construction in regions with fewer supply constraints, such as limited availability of land.
  • Over the past year, the pace of construction has been hampered by containment measures and shortages of materials and skilled workers. These factors are also putting upward pressure on construction costs.
  • Some potential sellers have been reluctant to show their homes during the pandemic.
  • Over time, supply is expected to adjust. A large number of building permits have been issued, with a growing share for single-family homes. Housing starts have also risen significantly in recent months, most notably in rural areas.

The Bank remains concerned about extrapolative expectations leading to overheated price increases and speculative activity (see chart below). They welcome the proposed changes to the Guideline B-20 by the Office of the Superintendent of Financial Institutions to help reduce these risks.

Bottom Line

This was a significant BoC announcement, suggesting a turning point in their thinking. The worst of the pandemic is over, the economy has been remarkably resilient, and the Bank can now see the light at the end of the tunnel. That light is now expected in the second half of 2022, rather than 2023. Although the policy rate will remain at its effective lower bound until then, the central bank has already begun to pare back its GoC bond buying.

Some of the Bank’s optimism reflects the comparative strength of the US economy, which is way ahead of Canada’s vaccine distribution.* The spillover effects of that are meaningful in terms of Canadian exports. The fiscal stimulus evident in this week’s federal budget also provides a ballast for the economy. Although an estimated 425,000 people are still insufficiently employed and the third wave containment measures and vaccine rollout are unpredictable, the Bank is more confident now than any time in the past thirteen months that we will attain full-employment by late next year.

*As of April 20, nearly 25% of the US population has been fully vaccinated and 39% have received at least one vaccine. In comparison, as of April 20, only 2.5% of the Canadian population has been fully vaccinated and 25.4% have had one vaccine. 

This script is also available in Autopilot.

French translation of this email will be available by 5pm ET April 26.
La traduction de ce courriel sera disponible d’ici 17 heures, le 26 avril.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

Blowout Canadian Job Growth Continued In March

General Joanna Yang 9 Apr

This morning, Statistics Canada released the March 2021 Labour Force Survey showing much stronger-than-expected job growth for the second month in a row, pointing towards a Q1 growth rate of more than 5.5%. This survey reflected labour market conditions during the week of March 14 to 20, when public health restrictions were less restrictive in several provinces than during the prior month.

Employment surged by a whopping 303,100 in March after a gain of 259,200 in February. The jobless rate fell to 7.5%, the lowest since before the pandemic. However, there remain many discouraged workers who are no longer actively looking for jobs but would prefer to be gainfully employed. Many of them might well be mothers who could not afford or find quality daycare or needed to help children with remote learning.

The employment rate–the percentage of the population aged 15 and older that is employed—increased 0.9 percentage points to 60.3%, which was still 1.5 percentage points below the rate seen in February 2020.

Employment gains in March were spread across most provinces, with the largest increases in Ontario, Alberta, British Columbia and Quebec. Much of the employment increase reflected a continued recovery in industries—including retail trade and accommodation and food services—where employment had fallen in January in response to public health restrictions. Growth in health care and social assistance, educational services, and construction also contributed to the national increase in March.

The COVID-19 pandemic continues to impact the labour market. Compared with February 2020, there were 296,000 (-1.5%) fewer people employed in March 2021 and 247,000 (+30.4%) more people working less than half of their usual hours. The number of workers affected by the COVID-19 economic shutdown peaked at 5.5 million in April 2020, including a drop in employment of 3.0 million and an increase in COVID-related absences from work of 2.5 million.

Among workers who worked at least half their usual hours in March, the number working at locations other than home increased by about 600,000 for the second consecutive month as public health restrictions eased across the country.While the number of Canadians working from home declined by 200,000 in March, working from home remains an important adaptation to the COVID-19 pandemic. Of the 5.0 million Canadians working from home in March, more than half (2.9 million) were doing so temporarily in response to COVID-19.

Total hours worked rose 2.0% in March, driven by gains in several industries, including educational services, retail trade, and construction. Building on a steady upward trend since April 2020, this brought total hours to within 1.2% of February 2020 levels. Hours worked among the self-employed continued to be much further behind (-7.7%) February 2020 levels, while hours among employees returned to pre-pandemic levels.

The unemployment rate falls to the lowest level since the start of the pandemic

The unemployment rate declined for the second consecutive month, falling 0.7 percentage points to 7.5% in March, the lowest since February 2020. This reflected strong employment growth that exceeded the number of people entering the labour market.

The number of people unemployed fell 148,000 (-8.9%) in March, with the majority (59.0%) of people leaving unemployment becoming employed. Despite sharp reductions in both February and March, the number of people unemployed stood at 1.5 million, up 371,000 (+32.4%) compared with February 2020.

The number of long-term unemployed—people who had been looking for work or on temporary layoff for 27 weeks or more—held steady in March. There were 286,000 (+159.5%) more people in long-term unemployment compared with February 2020. These are the folks that could be permanently scarred by the pandemic and for whom job training may well be helpful.

Bottom Line 

While Friday’s jobs report surprised on the upside, there are still concerns around an uneven recovery and the impact of the third-wave shutdown in the economy. As the virus becomes more contagious and lethal, the economic recovery remains at risk, heightened by the vaccine’s very slow rollout. The reduces the importance of this employment report for the Bank of Canada even though it is the last report before the central bank’s April policy decision. No doubt the Bank of Canada will highlight the rising risk of contagion on the economic recovery.

Prime Minister Justin Trudeau’s government will release its 2021 budget on April 19 and has already promised an additional spending dose. The Bank of Canada’s next policy decision is on April 21. The Bank will thus maintain the overnight rate at 25 basis points and refrain from tapering quantitative easing.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

A deal, B deal, C deal? 我到底符合哪个要求?

General Joanna Yang 20 Mar

很多客人在和我讨论贷款时, 经常会混淆一些概念, 比如什么是A 类,什么是B类?什么是保险的,什么是可保险的?什么是高贷款率, 什么又是传统的?根据不同的角度, 贷款会有各种叫法……很多人经常会把不同角度的概念混在一起讨论。 为了让大家有一个大致更清晰的分类,今天我总结了以下表格,这样方便大家大致对贷款的分类和基本特性有一个概念,在选择贷款的时候头脑也更清晰。

市场上,大家经常会听见用A Lender和 B lender的说法来划分贷款,这在 10年前的加拿大比较准确,当时 A Lender 和B lender界限划地非常清晰,那时只有大家熟知的6大银行做A deal,而 MFC(Mortgage Finance Company)只做B Deal。那时的房贷经纪也是按照A lender和B lender 有着严格的划分, A类房贷经纪只代理A Deal, B类房贷经纪只代理B Deal。

随着近十年来房地产市场的繁荣发展,信贷市场也发生着诸多变化,最显著的变化之一就是 为了争夺A Deal市场,除了生活中随处可见的大银行可以做A Deal之外,今天基本上所有的 MFC(如Home Trust, Equitable Bank, DLC, RMG, MCAP, Metrix, B2B, XMC等等等等)也都放出了自己的资源竞争A deal市场;而贷款经纪所代理的机构从过去严格地A类B类的划分变成了今天同时既可以代理A deal,也可以代理B Deal。所以在今天的市场中, 如果我们把按揭贷款按A类银行和B类银行来分并不十分准确,或者手已经过时了。 更准确的分法是按Deal(交易)的特性来分为A Deal,B Deal(以及C deal即通过MIC Mortgage Investment Company的私贷)。

为了让大家可以更清晰地大致明白A Deal,B Deal以及C deal,以下总结的表格通过贷款目的、按揭期限、贷款期限、房产价值要求、最高贷款比例、信用分、负债收入比、利率水平、收入证明, 费用、特点和贷款机构几个方面总结一些通常的特征。当然,每一个贷款机构对于不同案例, 都会有特殊考量, 这里的总结只是一般情况下的特征。 在准备贷款买房或再融资时,你可以对比自己的情况,大致对自己可以做到什么样的Deal有一个基本概念,也便于你和房产经纪更有效的沟通。

 

  A Deal (Big Bank and MFCs) B deal/Alt-A (MFCs) C deal

Private Lender (MICs)

Insured

保险的

Insurable

可保险的

Uninsurable

非保险的

Purpose

贷款目的

Purchase

购房

Purchase

购房

Purchase/Refinance

购房/再融资

Purchase/Refinance

购房/再融资

Purchase/Refinance/bridge finance

购房/再融资/过桥贷

AM year

按揭期限/年

25 25 30 Some lender can do max. 35 year
Term

贷款期限/年

1-10 year 1-10 year 1-10 year 1-5 year 0.5- 2 year
Property Value

房产价值

Under $1M

低于$100万

Under $1M

低于$100万

Can be over  $1M

可以高于$100万

Some cap $5M

有些限制最高$500万

LTV

最高贷款比

95% 80% 80% 80% some upto 100%
Credit

(Beacon Score )

信用分

680+

Some accept min 600

一些机构接受600+

680+

some accept min 600

一些机构接受600+

680+

some accept min

600

一些机构接受600+

500+

Some no requirement

一些没有要求

No strict requirement

没有严格要求

Debt/Income ratio (GDS/TDS)

负债收入比

39/44

(based on the Beacon Score of 680

基于680+分值)

 

39/44

(based on the Beacon Score of 680

基于680+分值)

Can extend the Ratio if LTV > 65%

如果贷款比大于65%负债收入比可以酌情提高

Can extend ratio, in some case over 60%

一些机构可以根据不同情况接受60%的负债收入比

No strict requirement

没有严格要求

Interest rate

利率水平

Lowest

最低

Higher than  Insured A deal

保险的利率高

Higher than Insured and insurable

保险的可保险的利率高

Higher than A deal, but much lower than C deal

A Deal 高, 比C deal

Highest

最高

Income Requirement

收入证明

Declared Income

( T1 General and NOA required)

报税单

Declared Income

( T1 General and NOA required)

报税单

Declared Income

( T1 General and NOA required)

报税单

Stated Income

(Bank Statement, etc.)

银行流水

No strict requirement

没有严格要求

Fee

费用

X

 

X X 1% lender’s fee

通常收1%的费用,可以提前交, 也可以在Mortgage放款时扣

Lender’s fee,  broker fee, lender’s legal fee, renewal fee…
Characteristics

特点

– Client pays the insurance premium

借款人需要从三大保险公司购买房贷保险(CMHC, Sagen, Canada Guarantee);

— Insurance guideline requires the Property price under $1M, i.e.$999,999

(保险公司要求房价不高于$100万,也就是$999,999)

 

–  Bank pays the insurance premium

贷款机构统一买保险,贷款机构付保费);

– Insurance guideline requires Property price under $1M, ie. $999,999

(保险公司要求房价不高于$100万,也就是$999,999)

 

– No insurance

没有保险

– Property price over $1M

房价可以高于$100万

– Credit may be not that strong;

信用分相对低

– Enough stated income;

报税不高,但银行流水高

– more Flexible on GDS-TDS, some can do over 60/60;

更高的负债收入比

— shorter term than A deal. Once client improves its credit or declared income can be back to A deal

一般期限较短(如2年)一旦借款人情况好转, 可以转回A deal。

 

— interest payment only

月供只还利息,无需还本金

–short term (6month -1.5 year)

短期限 (6个月-1.5年)

— 1st 2nd 3rd mortgage…

可以同一房产做2贷,3贷

— Quick turnaround time

快,有的可以做到24小时房贷

 

-Good Credit; 高信用

-Good Declared Income; 高报税

-Strict on GDS and TDS; 严格的负债收入比

– No Tax owing to CRA or no more than $2000, if not, then consider B deal

税局没有任何拖欠,或欠款不超过$2000, 否则考虑B deal

 

Stress Test qualification Rate

压力测试利率

Currently 4.79% Contract rate +2% or Benchmark 4.79%, which is higher
Lender

借款机构

Big banks and Mortgage Finance Companies (MFCs) MFCs MICs (Mortgage Investment Corporates)

 

 

[2020年, Dominion Lending Centers (DLC)为我们的委托人共完成700,000+笔按揭贷款,融资额达$80亿。感谢您让我们成为了加拿大最大的房屋贷款经纪公司之一,让我们在过去的15年中倍受大家信任和认可!我们的380+网点遍及全国,如您在房贷方面有任何问题,欢迎联系Joanna Yang(647-675-0286)或登陆我的网站 www.joannayang.ca。置业是很多人一生中最大的投资,为您找到条件最优的融资方案是我们的职责。

 

购房时,首付款最低额怎样算?

General Joanna Yang 9 Mar

购房时, 首付款的多少会直接影响三个方面 1)最终你可以购买房产的价位;2)是否需要按揭保险及按揭保险费用的多少;3)最终的贷款总额和每个时期的供款额。今天我们来谈一谈“购房时的首付款”。

首付款的来源?

最常见的首付款来源包括 —

  • 个人存款储蓄
  • RRSP (首次购房者)
  • 投资所得
  • 直系亲属赠予的不退还的资金
  • 其他房产售出所得,等等

贷款机构会更根据不同的资金来源要求提供不同的证明, 比如90天的银行存款证明,直系亲属的资金赠予信等等。

最低首付款额如何计算?

按政府规定, 最低首付额按以下层级计算叠加–

房产价格 最低首付款
$500,000 以下
  • 房价的5%
$500,000 至 $999,999
  • $500,000 的5%
  • 超出$500,000部分的10%
$1,000,000 以上
  • 房价的20%

如果贷款申请人是自雇人士或信用分数不够高,贷款机构可能会相应地要求提高首付比例。

计算演示–

如果房价低于 $500,000,以¥400,000为例,那么最低首付款额为$400,000*5% = $20,000.

如果房价高于$500,000,低于$1,000,000,

以房价$600,000为例,需要两个层级的计算叠加, 一共$35,000,具体计算如下:

$500,000 * 5% =$25,000 (1)

($600,000-$500,000)*10% = $10,000 (2)  .

(1)+(2)=$35,000.

什么是按揭保险?

买家首付不足20%时,必须在申请房贷时购买按揭保险。按揭保险是在借款人发生违约、无法还款的情况下,旨在保护贷款机构的一种保险, 所以也称为“按揭违约保险”。

有些贷款机构对于首付到达了20% 的自雇人士或者信用分数不佳的借款人也有要求购买按揭保险的要求。

按揭保险的一些基本基本要素

  1. 不适用于等于或高于$1,000,000的房屋;
  2. 承保的房屋最长期限为25年;
  3. 只适用于购买/续转按揭;
  4. 房产必须为购买者自住房 (自住房允许有一个单位出租);

按揭保险整体而言是有利于购房者的。大幅降低了首付的额度限制,使购房者仅凭5%-19.99%的首付比例即可以进入购房市场。

购房者购买了按揭保险,就意味着贷款机构奖房贷违约风险从借款人转嫁给了保险公司,贷款机构就可以用保险公司的更高评级给借款人更低的房贷按揭利率。按揭保险费用由借款申请人支付。借款人虽然支付了按揭保险费用,但降低了首付比例,同时因为有了保险,可以获得更低的房贷按揭利率。

加拿大三大按揭保险机构和基本费率

CMHC 、Sagen(过去的Genworth) 和 Canada Guaranty。

按揭保险的保费通常在0.6% 到4.5% 之间,自雇人士可能保费会更高一些。

按揭保险既可以选择一次性付清,也可以把它加进按揭贷款中,和房贷按揭一起在月供中付款。

(关于按揭保险的更多信息,欢迎和我们进一步咨询,或登录三大保险公司网站了解详情。)

首付款的多少对于按揭贷款还款额的影响?

假设 –

  • 房价 $400,000
  • 利率为 1.90%
  • 按揭25 年
  • 月供付款;
  • 按揭保险费加入了按揭贷款中
首付比例 首付款

房贷额

按揭保费   

贷款总额(包含按揭保费)  

    月供

25年付款总额   (包含全额本金和利息)

5%

$20,000 $380,000 $15,200 $395,200

$1654.47

$496,341

10% $40,000 $360,000 $11,160 $371,160 $1553.83

$466,149

20%

$80,000 $320,000 Not required $320,000 $1339.65

$401,896

 

从以上测算可以看出,首付的多少直接影响着购房者可以购买房屋的价位、月供、按揭保险等。在今天史无前例的低利率、房价还在上升期的时候,合理地放大杠杆,保证手中足够的现金流,应该是明智的选择。

 

[2020年, Dominion Lending Centers (DLC)为我们的委托人共完成700,000+笔按揭贷款,融资额达$80亿。感谢您让我们成为了加拿大最大的房屋贷款经纪公司之一,让我们在过去的15年中倍受大家信任和认可!我们的380+网点遍及全国,如您在房贷方面有任何问题,欢迎联系Joanna Yang(647-675-0286)或登陆我的网站 www.joannayang.ca。置业是很多人一生中最大的投资,为您找到条件最优的融资方案是我们的职责。

 

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