Great News On The Inflation Front Causes Big Bond Rally

General Jennifer Brophy 20 Feb

Canadian Inflation Falls to 2.9% in January, Boosting Rate Cut Prospects

The Consumer Price Index (CPI) rose 2.9% year-over-year in January, down sharply from December’s 3.4% reading. The most significant contributor to the deceleration was a 4% decline in y/y gasoline prices, compared to a 1.4% rise the month before (see chart below). Excluding gasoline, headline CPI slowed to 3.2% y/y, down from 3.5% in December.

Headline inflation of 2.9% marks the first time since June that inflation has moved into the Bank of Canada 1%-to-3% target band and only the second time to breach that band since March 2021.

Grocery price inflation also decelerated broadly in January to 3.4% y/y, down from 4.7% in December. Lower prices for airfares and travel tours also contributed to the headline deceleration. Prices for clothing and footwear were 1.3% lower than levels from a year ago, potentially reflecting the discounting of winter clothing after a milder-than-usual winter in much of the country.

The shelter component of inflation remains by far the largest contributor to annual inflation. The effect of past central bank rate hikes feeds into the CPI with a lag. The y/y growth in mortgage interest costs edged lower in January but still posted a 27.4% rise and accounted for about a quarter of the total annual inflation. Inflation, excluding mortgage costs, is now at 2.0%. Home rent prices continue to rise, but another component under shelter – homeowners’ replacement costs inched lower on slower house price growth.

On a monthly basis, the CPI was unchanged in January, following a 0.3% decline in December. On a seasonally adjusted monthly basis, the CPI fell 0.1% in January, the first decline since May 2020.

The Bank of Canada’s preferred core inflation measures, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim slowed three ticks to 3.4%, and the median declined two ticks to 3.3% from year-ago levels, as shown in the chart below.

Notably, the share of the CPI basket of goods and services growing at more than 5% has declined from the peak of 68% in May 2022 to 28% in January 2024.

Bottom Line

The next meeting of the Bank of Canada Governing Council is on March 6. While January’s inflation report was better than expected and shows that the breadth of inflation is narrowing, it is still well above the level consistent with the 2% inflation target.

Shelter inflation will remain sticky as higher mortgage rates over the course of last year filter into the index and the acute housing shortage boosts rents.

The Bank of Canada will remain cautious in the face of still-high wage gains and core inflation measures above 3%. I hold to my view that the Bank will begin cutting rates in June.

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

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French translation of this email will be available by 5pm ET, February 20th
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Canadian Housing Appears To Be Close To Bottoming

General Jennifer Brophy 16 Mar

Housing Market Could Be Poised For A Spring Rebound

The Canadian Real Estate Association says home sales in February bounced 2.3% from the previous month. Homeowners and buyers were comforted by the guidance from the Bank of Canada that it would likely pause rate hikes for the first time in a year.

The Canadian aggregate benchmark home price dropped 1.1% in February, the smallest month-to-month decline of rapid interest rate increases in the past year. The unprecedented surge in the overnight policy rate, from a mere 25 bps to 450 bps, has not only slowed housing–the most interest-sensitive of all spending–but has now destabilized global financial markets.

In the past week, three significant US regional financial institutions have failed, causing the Fed, the Federal Deposit Insurance Corporation and the Treasury to take dramatic action to assure customers that all money in both insured and uninsured deposits would be refunded and the Fed would provide a financial backstop to all financial institutions.

Stocks plunged on Monday as the flight to the safe haven of Treasuries and other government bonds drove shorter-term interest rates down by unprecedented amounts. With the US government’s reassurance that the failures would be ring-fenced, markets moderately reversed some of Monday’s movements.

But today, another bogeyman, Credit Suisse, rocked markets again, taking bank stocks and interest rates down even further. All it took was a few stern words from Credit Suisse Group AG’s biggest shareholder on Wednesday to spark a selloff that spread like wildfire across global markets.

Credit Suisse’s shares plummeted 24% in the biggest one-day selloff on record. Its bonds fell to levels that signal deep financial distress, with securities due in 2026 dropping 20 cents to 67.5 cents on the dollar in New York. That puts their yield over 20 percentage points above US Treasuries.

For global investors still, on edge after the rapid-fire collapse of three regional US banks, the growing Credit Suisse crisis provided a new reason to sell risky assets and pile into the safety of government bonds. This kind of volatility unearths all the investors’ and institutions’ missteps. Panic selling is never a good thing, and traders are scrambling to safety, which means government bond yields plunge, gold prices surge, and households typically freeze all discretionary spending and significant investments. This, alone, can trigger a recession, even when labour markets are exceptionally tight and job vacancies are unusually high.

Canadian bank stocks have been sideswiped despite their much tighter regulatory supervision. Fears of contagion and recession persist. Job #1 for the central banks is to calm markets, putting inflation fighting on the back burner until fears have ceased.

Larry Fink, CEO of Blackrock, reminded us yesterday that previous cycles of rapid interest rate tightening “led to spectacular financial flameouts” like the bankruptcy of Orange County, Calif., in 1994, he wrote, and the savings and loan crisis of the 1980s and ’90s. “We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the US regional banking sector (akin to the S.&L. crisis) with more seizures and shutdowns coming,” he said.

So it is against that backdrop that we discuss Canadian housing. The past year’s surge in borrowing costs triggered one of the record’s fastest declines in Canadian home prices. Sales were up in February, the markets tightened, and the month-over-month price decline slowed.

New Listings
The number of newly listed homes dropped 7.9% month-over-month in February, led by double-digit declines in several large markets, particularly in Ontario.
With new listings falling considerably and sales increasing in February, the sales-to-new listings ratio jumped to 58.4%, the tightest since last April. The long-term average for this measure is 55.1%.
There were 4.1 months of inventory on a national basis at the end of February 2023, down from 4.2 months at the end of January. It was the first time the measure had shown any sign of tightening since the fall of 2021. It’s also a whole month below its long-term average.

Home Prices
The Aggregate Composite MLS® Home Price Index (HPI) was down 1.1% month-over-month in February 2023, only about half the decline recorded the month before and the smallest month-over-month drop since last March.
The Aggregate Composite MLS® HPI sits 15.8% below its peak in February 2022.

Looking across the country, prices are down from peak levels by more than they are nationally in most parts of Ontario and a few parts of British Columbia and down by less elsewhere. While prices have softened to some degree almost everywhere, Calgary, Regina, Saskatoon, and St. John’s stand out as markets where home prices are barely off their peaks. Prices began to stabilize last fall in the Maritimes. Some markets in Ontario seem to be doing the same now.

Despite significant declines, prices remain roughly 28% above pre-pandemic levels.

Bottom Line

Last month I wrote, “The Bank of Canada has promised to pause rate hikes assuming inflation continues to abate. We will not see any action in March. But the road to 2% inflation will be a bumpy one. I see no likelihood of rate cuts this year, and we might see further rate increases. Markets are pricing in additional tightening moves by the Fed.

There is no guarantee that interest rates in Canada have peaked. We will be closely monitoring the labour market and consumer spending.”

Given the past week’s events, all bets are off regarding central bank policy until and unless market volatility abates and fears of a global financial crisis diminish dramatically. Although the overnight policy rates have not changed, market-driven interest rates have fallen precipitously, which implies the markets fear recession and uncontrolled mayhem. As I said earlier, job #1 for the Fed and other central banks now is to calm these fears. Until that happens, inflation-fighting is not even a close second. I hope it happens soon because what is happening now is not good for anyone.

Judging from experience, this could ultimately be a monumental buying opportunity for the stocks of all the well-managed financial institutions out there. But beware, markets are impossible to time, and being too early can be as painful as missing out.

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

Bad News Is Good News for the Bank of Canada

General Jennifer Brophy 28 Feb

Statistics Canada released the real gross domestic product (GDP) figure for the final quarter of 2022 this morning, showing a marked slowdown in economic activity. This will undoubtedly keep the central bank on the sidelines when they announce their decision on March 8. The Bank had estimated the Q4 growth rate to be 1.3%. Instead, the economy was flat in Q4 at a 0.0% growth rate. This was the slowest quarterly growth pace since the second quarter of 2021.

Inventory accumulation in the fourth quarter declined for manufacturing and retail goods, driving investment in inventories to decline by $29.8 billion. Further, higher interest rates by the Bank of Canada hampered investment in housing (-8.8% at an annual rate), and business investment in machinery and equipment was a weak -5.5%. On the other hand, personal expenditure in the Canadian economy expanded by 2.0% (vs -0.4% in Q3), supported by the red-hot labour market. Government spending growth also accelerated. At the same time, net foreign demand contributed positively to GDP growth as exports grew by 0.8% while imports shrank by 12.0%.

The weak Q4 result reduced the full-year gain in GDP for 2022 to 3.4%, compared to 2.1% in the US, 4.0% in the UK, and 3.6% in the Euro area.

The January GDP flash estimate was +0.3%, pointing towards a rebound in the first quarter of this year. However, flash estimates are always volatile and subject to revision. Nevertheless, the growth in GDP this year will likely be much more moderate, less than 1%.

Bottom Line:
The weakness in today’s economic data will be good news to the Bank of Canada, having promised a pause in rate hikes to assess the impact of the cumulative rise in interest rates over the past year. Today’s GDP report and the slowdown in the January CPI inflation numbers portend no interest rate hike on March 8.

Now the Bank will be looking for a softening in the labour market.

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

Non-Resident Financing in the Sea to Sky Corridor

General Jennifer Brophy 23 Nov

Here is what you need to know about foreign buyer financing for real estate purchases in British Columbia, Canada.

If you are obtaining a mortgage, you will need a Canadian bank account. Most banks require you to show your identification in person to open an account.

Check the bank’s wire transfer policy to find out what they will need from you when you are ready to move money. Some institutions require you to be physically present in the branch to sign wire transfer forms. This is relevant because most lenders now require you to have your downpayment and closing costs in your Canadian account 14 to 30 days before completion, depending on the lender.

Keep copies of all wire transfer documentation, as this will form part of your downpayment verification.

While you are in Canada, you should plan to visit a real estate lawyer. Most banks make it a part of their mortgage instructions that the lawyer see the clients in person.

Depending on which lender you are approved through, you may have to come back to Canada to sign your closing documents in person.

Financing is typically available for up to 65% of the purchase price and often up to 80% for US Residents. If you are considering a property with a purchase price over $1 million, financing may be reduced to fit the banks’ sliding scale. Exceptions to the sliding scale can be requested and are often granted based on the strength of the applicant and the property.

My role as your mortgage broker is to find the best available rates for the property you wish to purchase. The down payment amount can vary depending on what type of property you are purchasing, and the location. I always try to secure approval with no broker or lender fees, but in some cases, they are applicable. If a fee applies, there is always full disclosure, and we do not proceed without your permission.

Mortgage terms and policies are significantly different than in the US. I am here to walk you through the process and ensure a seamless financing process.

Bank of Canada holds benchmark interest rates steady in final decision of 2021

General Jennifer Brophy 8 Dec

The Bank of Canada made its eighth and final (scheduled) interest rate decision of the year and for the eighth time, left its overnight benchmark unchanged at 0.25%. As a result, the Bank Rate stays at 0.5%.

These low rates have been a feature of monetary policy since March 2020 with the initial pandemic lockdown of the economy.

Going into today’s announcement, the question on the minds of economists and borrowers alike is when will the Bank change its policy? We looked for clues in the Bank’s statement and summarize what was said below:

Inflation

CPI inflation is elevated and the impact of global supply constraints is “feeding through” to prices on a broader range of goods
The effects of these constraints will likely take some time to work their way through, given existing supply backlogs
Gasoline prices, a major factor pushing up CPI inflation, have recently declined
Core measures of inflation are little changed since September
The Bank is closely watching inflation expectations and labour costs to “ensure that the forces pushing up prices” do not become embedded
Canadian housing & economic performance

Housing activity had been moderating, but appears to be regaining strength, notably in resales
Canada’s economy grew by about 5.5% in the third quarter, in line with expectations and bringing the level of GDP to about “1.5% below the last quarter of 2019, before the pandemic began”

Third-quarter 2021 GDP growth was led by a rebound in consumption, particularly services, as restrictions were further eased and higher vaccination rates improved confidence
Persistent supply bottlenecks continued to inhibit growth in other components of GDP, including non-commodity exports and business investment
Recent indicators suggest the economy had considerable momentum heading into Q4
Broad-based job gains in recent months have brought the employment rate “essentially back” to its pre-pandemic level
Job vacancies remain elevated and wage growth has picked up
Devastating floods in British Columbia and uncertainties arising from the Omicron (COVID-19) variant “could weigh on growth” by compounding supply chain disruptions and reducing demand for some services
Global economy

The global economy continues to recover from the effects of COVID-19
Economic growth in the United States has accelerated, led by consumption, while growth in some other regions is moderating after a strong third quarter
Inflation has increased further in many countries, reflecting strong demand for goods amid ongoing supply disruptions
Omicron has prompted a tightening of travel restrictions in many countries and a decline in oil prices, and “injected renewed uncertainty”
Accommodative financial conditions are still supporting economic activity
Outlook: Stimulus continues

The Bank continues to expect CPI inflation to remain elevated in the first half of 2022 and ease back towards 2% in the second half of next year.

The Bank’s Governing Council noted that in view of ongoing excess capacity, the economy continues to require “considerable monetary policy support.” Accordingly, it remains committed to holding its policy interest rate at the effective lower bound until economic slack is absorbed so that the Bank’s 2% inflation target is sustainably achieved.

In the Bank’s October projection, the inflation target would be sustainably achieved “sometime” in the middle quarters of 2022. It did not provide further updates to this timing. Consequently, the market is left to speculate about when rates will rise.

The Bank did note, however, that it will continue to provide the “appropriate degree of monetary policy stimulus” to support the recovery and achieve its inflation target.

Time to borrow

With the benchmark rate unchanged – for now – but signs of a coming shift in monetary policy, it pays to think proactively about your property financing plans for 2022.

January 26, 2022 is the Bank of Canada’s next scheduled touch point on monetary policy.

Here are the top 5 most important things to know about gift letters in Canada and gifted down payments in general.

General Jennifer Brophy 17 Nov

1. The gift must come from an immediate family member. This includes parents, siblings, or grandparents. On rare exceptions an uncle or cousin may be used, however, the money is best provided through an immediate family member. Friends can not supply a gift letter Canada.

2. The giftor (the person giving the gift) bank account does not usually need to be shown. In other words, all the lender needs to see is the gifted funds in the buyer’s (giftee’s) account. It doesn’t matter if the giftor got these funds from a credit line or savings. As long as the giftor is an immediate family member, then the giftors accounts usually do not need to be shown.

3. The gift letter is a pre-written template specific to whatever mortgage lender or bank is financing your home. You do not need to create a gift letter from scratch or download one online. It’s simply a matter of filling out giftor and giftee information on the lender template, the gift amount, and the date the gift was transferred into your account.

4. The gift letter template will state that this is a gift and that the down payment funds do not need to be repaid. Your banker, broker, or lawyer can not hear that a gift is actually a loan, otherwise, by regulation/law they must inform the lender that it is a loan, not a gift. Indeed, the intention needs to be that the gifted funds are not a loan, otherwise, the strength of the application would be misrepresented and this could lead to a very bad situation for the borrower, lender, and our financial system as a whole.

5. How long is the gift letter good for? Technically the lender needs to see a 90-day history of bank account activity. So if the gifted money falls outside of the 90 days then more account history may be required, and a new gift letter may be required if one was written up 90 days prior. Typically, however, gifted funds are made within 90 days so this is not an issue. It’s also worth noting that most lenders will need to see the gifted funds in the buyer’s account at least 2 weeks before the closing date.

Connect with me for more information on gifting funds for down payment, and to receive a templated gift letter example.

Bank of Canada holds benchmark interest rates steady, ends special quantitative easing

General Jennifer Brophy 28 Oct

The Bank of Canada made its seventh interest rate decision of the year and for the seventh time, left its overnight benchmark unchanged at 0.25%. This low rate has been the order of the day since March 2020. As a result, the Bank Rate stays at 0.5%. It also ended its massive, pandemic-induced quantitative easing program in place since March 2020.

The Bank also made some new comments on the state of the economy at home and abroad as summarized below:

Global economy

The Bank projects global GDP will grow by 6.5% in 2021 – a strong pace but less than projected in the July Monetary Policy Report – and by 4.25% in 2022 and about 3.5% in 2023.
The global economic recovery is progressing although vaccine availability and distribution worldwide remain uneven and COVID variants pose risks to health and economic activity.
Due to strong global demand for goods, pandemic-related disruptions to production and transportation are constraining growth.
Inflation rates have increased in many countries, boosted by these supply bottlenecks and by higher energy prices.
While bond yields have risen in recent weeks, financial conditions remain accommodative and continue to support economic activity.
Canadian housing & economic performance

Robust economic growth has resumed, following a pause in the second quarter.
The Bank now forecasts Canada’s economy will grow by 5% this year before moderating to 4.25% in 2022 and 3.75% in 2023.
Demand is expected to be supported by strong consumption and business investment and a rebound in exports as the US economy continues to recover.
Housing activity has moderated, but is expected to remain elevated.
Shortages of manufacturing inputs, transportation bottlenecks and difficulties in matching jobs to workers are limiting the economy’s productive capacity.
This output gap is likely to be narrower than the Bank had forecast in July, although the impact and persistence of these supply factors are hard to quantify.
Strong employment gains in recent months were concentrated in hard-to-distance sectors and among workers most affected by lockdowns and this has significantly reduced the “very uneven” impact of the pandemic on workers.
Canadian inflation

A recent increase in CPI inflation was anticipated in July, but the main forces pushing up prices – higher energy prices and pandemic-related supply bottlenecks – “now appear to be stronger and more persistent” than the Bank expected.
BoC now expects CPI inflation to be elevated into 2022 and ease back to around the Bank’s 2% target by late 2022.
The Bank is “closely watching” inflation expectations and labour costs to ensure that the temporary forces pushing up prices do not become embedded in ongoing inflation.
Outlook

The Bank’s Governing Council believes that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. That support will continue to come from the Bank’s ongoing commitment to holding its policy interest rate at what it defines as the “effective lower bound” until economic slack is absorbed so that its 2% inflation target is “sustainably achieved.” In the Bank’s projection, this happens sometime in the middle quarters of 2022, which is perhaps a little earlier than the central bank originally forecast.

Accordingly, and in light of the progress made in the economic recovery, the Bank’s Governing Council decided to “end quantitative easing” and keep its overall holdings of Government of Canada bonds roughly constant. This is not entirely surprising since the Bank has signaled its intention to taper its special bond-buying activity for some time. The end of QE also broadly aligns with the approach undertaken by central bankers in the United States.

The Bank noted that it will continue to provide the “appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target.”

A great time to borrow

With the benchmark rate unchanged (for now), employment at pre-pandemic levels, Canada’s borders re-opening, and First National ready to serve you with competitive rates and services, now might be the best time on record to finance a residential or commercial property purchase.

The BoC’s next scheduled policy announcement is December 8, 2021. Please watch for First National’s next Executive Summary the same day.

First National Financial LP

Getting the Down Payment Down.

General Jennifer Brophy 7 Jun

A down payment is one of the most essential aspects of every mortgage application and new home purchase. In Canada, home purchases require a minimum cash payment from your own funds that is put towards the purchase. This is your down payment and is considered your stake in the deal.

Many home buyers understand that a certain amount of money down will be required on a home. However, most don’t realize the ins-and-outs of down payments, such as where the funds are allowed to come from and ensuring a proper paper trail.

Here are a few things to keep in mind while preparing your down payment and working towards your perfect home!

SOURCES OF DOWN PAYMENT
Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize, is that lenders are required to verify the source of the funds. This allows them to ensure that they are coming from an acceptable source. Sources that further contribute to indebtedness are less-likely to be considered (such as line of credit or credit card). Instead, the best and most traditional options for your down payment are:

SAVINGS ACCOUNT
The first and most traditional method is your savings account, where you have been pinching your hard-earned pennies to save up for this day!

If you are utilizing your personal savings for a down payment, note that lenders will require three months of full bank statements. This includes name, account number, transactions and balance history. For any large deposits made in that time (sale of a car, work bonus, etc.), explanations and supporting documents will be required.

GIFT FROM FAMILY MEMBER
If you are fortunate enough to receive help from the Bank of Mom and Dad for your down payment, there are certain requirements:

A signed gift letter from the immediate family member contributing the fund
Proof of the transfer into your bank account. This can be a bank statement documenting the money being moved from the donor’s account and into yours. The statements must include names, account numbers and the full transaction history during the time period in question.
Important note: If money is being received from immediate family overseas, most lenders will require copies of the wire transfer. In addition, they may ask for account history.
RRSP WITHDRAWAL
Another option for down payment is the use of Registered Retirement Savings Plan (RRSP), but only if you are a first-time buyer. This is part of the Home Buyers’ Plan (HBP), which allows first-time buyers to borrow up to $35,000 from their RRSP’s (tax-free!) -as long as the money is repaid within 15 years. Please note: The minimum repayment is 15 equal instalments paid once per year.

HOW MUCH DOWN?
When it comes to putting money down on your new home, you need to consider the minimum down payment required as well as additional fees.

The minimum amount required in Canada is 5% for the first $500,000, with 10% down on any amount beyond that threshold. For example, on a $600,000 house you would need to put $35,000 down at minimum ($25,000 on the first $500,000 and $10,000 for the additional $100,000 purchase price).

Keep in mind, if your down payment is less than 20% of the price of your home, you will be required to purchase mortgage loan insurance in case of default. These premiums range from 0.6% to 4.50% of the total amount of your mortgage. Using the example above, this would mean $3,600 to $27,000 in mortgage insurance premiums.

If you are able to put 20% down on your new home (which is the recommended amount), you would be looking at an investment of $120,000 down with no mortgage insurance premiums required.

ADDITIONAL COSTS AND FEES
One component of the purchase process that homeowners often forget about, are the closing costs. These are typically 1.5% up to 4% of the purchase price. In order to get financing, you are required to show that you have enough to cover these costs, which include legal fees.

When you have collected the funds for your down payment and closing costs, you must ensure those funds remain in your bank account once you’ve provided confirmation. They should only leave your account when they are provided to your lawyer to complete the purchase. This is because lenders will often request updated statements closer to the closing of the sale, to ensure nothing has changed. If money has been moved around, or if there are new large deposits or withdrawals, they will all need to be confirmed and could affect approval.

The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Consider contacting a DLC Mortgage Professional today to help guide you through the process! Make sure you are upfront about your down payment amount, and where it is coming from. This will help a mortgage broker determine whether or not it is suitable, and allow them to find the best lender and mortgage product for you!

Banking Regulator Aims To Make It Tougher To Get An Uninsured Mortgage

General Jennifer Brophy 9 Apr

With several Big-Five bank CEOs calling for regulatory action to slow the red-hot housing market, it didn’t take long for the Office of the Superintendent of Financial Institutions (OSFI), the governor of federally regulated financial institutions, to respond. In a news release issued today, OSFI proposed an increase in uninsured mortgages’ qualifying rate to the higher of the mortgage contract rate plus 200 basis points or 5.25% as a minimum floor.

Based on posted rates of the country’s six largest lenders, the current threshold is at 4.79%. Before the pandemic, the posted rate was widely considered too high relative to much lower contract rates. Remember, Canada’s six largest lenders under OSFI’s jurisdiction set the posted rate each week when they submit to the Bank of Canada the so-called ‘conventional 5-year mortgage rate’. It has increasingly born little relationship to actual contract rates.

OSFI, once again, shows itself to cozy up to the Canadian banking oligopoly. Keep in mind that delinquency rates on the Canadian banks’ mortgage books are very low–both in historical terms and compared with financial institutions in the rest of the world. OSFI couched this proposal in terms of “the importance of sound mortgage underwriting.”

In the release, OSFI said, “The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of a change in circumstances, such as the reduction of income or a rise in mortgage interest rates. As mortgages are one of the largest exposures that most banks carry, ensuring that borrowers can repay their loans strongly contributes to the continued safety and soundness of Canada’s financial system.”

The comment period ends on May 7. OSFI reported that they would communicate the revised B-20 Guideline by May 24, with an implementation date of June 1, 2021.

This all but ensures that the current boom in home buying will accelerate further in the spring market–providing an impetus for borrowers to get in under the June 1 deadline. OSFI’s move will trigger an even hotter spring housing market as demand is pulled forward just as it was before the January 1, 2018 implementation date of the current B-20 ruling.

This will not impact non-federally regulated FI’s such as credit unions, mono-lines and private lenders, nor does it immediately impact insured-mortgage borrowers.

The federal government is in charge of mortgage qualification for insured mortgages. CMHC and the finance department could well follow OSFI’s lead in tightening qualifying rules for insured loans.

Bottom Line

It is noteworthy to remember that on January 24, 2020, OSFI indicated that it was reviewing the benchmark rate (or floor) used for qualifying uninsured mortgages. At that time, the thought was that the widening gap between the posted rate and the contract mortgage rate was too large and that OSFI and the Bank of Canada would publish a mortgage rate weekly that would better reflect the contract rates. The new qualifying rate would be that contract mortgage rate plus 200 basis points. This consultation was suspended on March 13, 2020, in response to challenges posed by the COVID-19 pandemic.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

10 Reasons you should use a whistler mortgage broker

General Jennifer Brophy 19 Mar

SAVE TIME. When you deal with a mortgage broker, you only have to fill out one application (and we all know those types of applications aren’t exactly fun to complete). The mortgage broker then shops your application to lenders to find you the best product and rate.

SAVE MONEY. There’s absolutely no charge for our services on typical residential mortgage transactions. How can we afford to do that? Like many other professional services such as insurance, mortgage brokers are generally paid a finder’s fee when we introduce trustworthy, dependable customers to a financial institution. These fees are quite standard nearly industry-wide so that the focus remains on you, the customer.

CHOICE. If you were to just go to your bank, you would only be offered THEIR products. A mortgage broker can deal with a variety of credit unions, trust companies, commercial banks, and private lenders.

PUT YOUR MIND AT EASE. Knowing that you can rely on the expertise of the mortgage broker when it comes to the right financing can feel like a ton of bricks have been lifted off your shoulders.

GREAT SERVICE. Mortgage brokers work for YOU. You will feel like you have someone on your side, working for your best interests. It’s a win-win situation for both you and the mortgage broker when the outcome is favorable.

GUIDANCE THROUGH THE FINE PRINT. A mortgage broker can go through the conditions with you and answer any questions you may have as well as walk you through the next steps leading up to the closing of the mortgage transaction.

WE NEGOTIATE ON YOUR BEHALF. Many people are uncertain or uncomfortable negotiating mortgages directly with their bank. Brokers negotiate mortgages every day on behalf of Canadian homebuyers. You can count on our market knowledge to secure competitive rates and terms that benefit you and your homeownership goals.

SPECIAL INCENTIVES. Many financial institutions would love to have you as a client, which is why they often offer incentives to attract creditworthy customers. These can include retail points programs, discounts on appliances, shopping clubs, and more. We do the math on which offers might be worth your attention when it comes to financing or mortgage insurance – so you get the perks you deserve.

THINGS MOVE QUICKLY. Our job isn’t done until your closing date goes smoothly. We’ll help ensure your mortgage transaction takes place on time.

PROTECT YOUR CREDIT SCORE. If you apply at dozens of lenders yourself, not only is it time-consuming, it can lead to a lower credit score. If you do too many credit checks within a short time span, it can lower your credit score. With a broker, typically they only have to pull your credit score once, helping protect your credit score.

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