Friday Mortgage Round Up, December 28, 2012

This week's mortgage lowdownWith Christmas and the supposed apocalypse now behind us, and a brand new year just around the corner, what could be a better time to do a Round Up of the biggest mortgage moments of 2012?

This week, let’s take a look at the current state of the Canadian mortgage market, crunch the stats, and compile the years news – the good, the bad… and the ugly.

The Good: CMHC Cleans Up Canada’s Mortgage Act

There was some initial pushback to the restrictions CMHC put in place this summer to stem mortgage affordability (and some realtors are pointing the blame for a market downturn), but the policy change has been effective.The number of mortgages in arrears in Canada has dropped off since 2011 and throughout the first half of 2012. Moreover, the number of mortgages that have been in arrears for three or more months declined from 0.41 per cent in 2011 to 0.36 per cent in the first half of 2012. Probably the craziest stat: A whopping 16.9 per cent of high-ratio mortgages in 2010 would not have been approved under the new mortgage rules!

Overall net worth has also increased, particularly in… Moncton, Ontario! that’s right, this is our leader for household growth of major urban centres – higher even than western market giants Calgary and Edmonton! While concerns have surrounded a dwindling number of housing starts, inventories of new builds are in line with averages as well as population growth. In fact, housing starts are above the long-term average, and rose this year by 2.1 per cent over 2011 levels.

The Bad: TREB’s Boom to Bust?

It’s no surprise that some of the year’s gloomiest housing headlines came from one of the largest markets traditionally bolstered by the condo boom. Toronto has experienced a drop in overall sales while prices hike (up by three per cent annual rate of growth). Sales in the first half of December were down by 16 per cent in the GTA, compared with this time last year, as those aforementioned CMHC rules take their toll, along with additional upfront municipal land transfer taxes.

Sales in Toronto have dropped around 20 per cent, with new listings taking a 15 per cent hit, while the average price hasn’t really budged. Perhaps the market is going through a phase of stalemate, as buyers and sellers butt heads on price. Buyers are obviously holding out for prices to drop, whereas sellers aren’t desperate enough to lower their asking price just to close the deal… yet.

In the usually booming 905 region, sales have dropped around 12 per cent, with the average price rising by about five per cent – and the market isn’t responding too well to the increase. As new listings are up slightly, this area may experience a price correction.

Combined, the GTA and 905 have had sales drop nearly 16 per cent, with average prices rising by three per cent, and new listings decreasing by five per cent.

The Ugly: CREA’s New Forecast

As reported earlier this week, the Canadian Real Estate Association has revised their initial forecast for the Canadian housing market, as dismal November numbers reported a 11.9 per cent drop in growth year over year. It’s the second time CREA has had to adjust its forecast since September, as third quarter sales have been downgraded across most provinces.

The largest markets continue to be hit the hardest – namely Montreal, Toronto and Vancouver. CREA points the finger at CMHC’s mortgage tightening rules for the market cool-off, well Flaherty deflects blame by saying Canadians’ increasing awareness of household debt dangers and low interest rates are the true culprits.

 The Nitty Gritty: CAAMP Fall Report Market Trends and Stats

2012 was truly the banner year for the fixed mortgage rate – 79 per cent of mortgage shoppers have locked and loaded into a fixed rate this year – a huge change from 2010, when fixed and variable shoppers were split around 50 / 50 – these days, it’s a 90:10 ratio for ALL mortgages – not just new business!

It’s also a coin toss for new mortgage originations; brokers are just as likely to gain the business as the banks in this area, however consumers are less likely to go through a broker upon renewal. Out of those consumers who renewed their mortgages over the past two years, one in four of them voluntarily increased their payment amounts, with an additional 15 per cent choosing to make a lump sum payment.

As for mortgage rates, 2012 was a year of record lows – the average rate for the year sits at 3.26 per cent, with the average posted rate at 5.28 per cent.

Related Topics

Mortgage News / Mortgages

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