FIND AN EXPERT
Let us connect you with
the right broker for you.

Contact Us

FIND AN EXPERT
Drop your contact info below, and we'll be in touch. 

Contact Us

The Stress Test & A Slowing Housing Market | The Latest in Mortgage News

Jackson Middleton • June 18, 2018

There’s been no shortage of new data pointing to slower home sales and tempered price growth across the country.


Most of the blame has been directed at OSFI’s new stress test , which preceded the slowdown when it came into effect on January 1.

Here’s a sampling of recent reports on the state of Canada’s real estate market:

Home Sales Reach 5-Year Low

Home sales continued their slump in May, with sales in most markets down slightly from April but down by 16.2 percent from May 2017 to a five-year low, the Canadian Real Estate Association reported today.

Declines were led by markets such as the Okanagan Region, Chilliwack and the Fraser Valley, Durham Region in the Greater Toronto Area and Quebec City.

The average home price was also down by 6.4% from last May.

“This year’s new stress test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” said CREA’s Chief Economist, Gregory Klump. “Movements in the stress test interest rate are beyond the control of policy-makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”

Mortgage Borrowing Falls to 4-Year Low

StatsCan just came out with first-quarter data showing that mortgage borrowing fell to its lowest level since 2014.

Over the first three months of 2018, mortgage borrowing fell $2 billion to $13.7 billion, mirroring the 17 percent drop in residential sales activity in Q1.

“The steeper drop to start 2018 suggests we may finally be at a turning point, as the one-two punch of stricter mortgage rules and higher interest rates slow household borrowing while income continues to climb,” BMO economic analyst Priscilla Thiagamoorthy wrote in a research note.

Household credit also dropped in the quarter, with the country’s debt-to-disposable income ratio falling to 168 percent. That’s down from 169.7 percent in the fourth quarter and the record high of 170 percent in Q3 last year.

Borrowing by Millennials Sees Major Pullback

While home sales are down across the country, there’s been a disproportionate drop-off in mortgage originations by millennials, according to data from TransUnion.

The credit bureau reported that originations among this age group are down 19.5 percent from Q4 2017 to Q1 2018. That compares against an 8.8 percent decline in originations among all age groups.

This follows a new poll that found a majority of young British Columbians believe they will be unable to find affordable real estate.

The West Insights and Coast Capital Savings survey found 60 percent of residents between the ages of 18 and 29 are “seriously considering” moving to a market where prices are more affordable.

While B.C. residents aged 30-plus are less likely to move (33 percent), they do sympathize with the current affordability issue facing younger residents, with 89 percent saying they believe it is virtually impossible for young people to purchase a house in the province.

Toronto & Vancouver Drop in Global Price Growth Ranking

Toronto and Vancouver have slipped in a global survey of the world’s most expensive housing markets.

According to Knight Frank’s quarterly price growth survey, Toronto fell to 18th place (down from 11th), while Vancouver is now ranked 31st (down from 22nd place).

Seoul, South Korea, holds the top spot for international price growth, where prices are up 25 percent from a year earlier.

Canada as a whole slipped in ranking from 10th to 15th spot, with price growth at 6.6 percent (down from 8.9 per cent last quarter).

Recreational Housing Expected to Boom

The one segment of the market that shows healthy signs of growth heading into summer 2018 is the recreational property market, according to the Recreational Properties Survey from Royal LePage.

On average, prices for recreational properties are forecast rise 5.8 percent to $467,764, with higher growth forecast in Ontario and Alberta, at 10.5 percent and 8.9 percent year-over-year to $535,885 and $770,100, respectively.

“While home values and sales activity in Canada’s largest urban markets have softened, demand for recreational properties remains robust in most regions,” Royal LePage CEO and President Phil Soper said in a release. “The search for that perfect summer getaway continues unabated.”

Meanwhile, British Columbia’s new speculation tax is expected to have a cooling effect on recreational properties there, with prices predicted to decline.


This article was written by Steve Huebl and was originally published on Canadian Mortgage Trends on June 15th 2018, however as it contained great information, we decided to share it on our blog as well. If you have any mortgage questions, any of our Canadian Mortgage Experts would love to connect with you, contact us anytime!


RECENT POSTS 

RRSP As A Downpayment

By DLC Canadian Mortgage Experts • December 28, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • December 21, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
More Posts
Share by: