Spotlight On Mortgages: June 28, 2013

Spotlight on Mortgages

Genworth Canada Calls For Mortgage Market Stability

“Slow and steady wins the race” seems to be the mantra of the Canadian housing market these days, as the latest set of data points to moderate, though consistent, growth this year and next.

Genworth Canada, a private residential mortgage insurer that provides default mortgage coverage to high ratio buyers, has released their twice-annual Metropolitan Housing Outlook. Their findings state our market will stabilize in 2013 after three years of unsustained growth and correction, though this growth will be modest for at least the next five years.

 Supply And Demand Finds New Balance

The report found that while the economy is gathering strength from improved employment levels and recovering domestic industries, housing demand has tapered as a result of last summer’s CMHC mortgage regulation tightening. As fewer home buyers enter the market, supply is beginning to take cues from reduced demand. As we’ve previously reported, the cooldown is notable in very active urban markets, as condo developers put future development plans on hold, and current projects reach completion. Only 182,000 new units will start in 2013, according to the report – a 15.2 per cent decline year over year.

 Buyers Looking To Avoid Excessive Debt

The report found that while the decline in buyers is in part to affordability issues, many Canadians are also heeding the advice of Department of Finance minister Jim Flaherty, and are focusing on paying down their household debt before taking on a mortgage.

As well, defaults on mortgage insurance payments, mortgage arrears and bankruptcies are also lower, due in part to stronger employment across Canada.

 Slower Sales Are Starting To Affect Prices

A main concern of the Department of Finance has been the potential overvaluation of the Canadian housing market, and the resulting fallout should the dreaded “bubble burst” occur. While the market seems to have been spared a dramatic price crash, Genworth’s report indicates that growth in prices is starting to slow down, as sales droop despite low mortgage rates.

New home prices are expected to grow 2.1 per cent this year – down from the previous forecast of 2.2 per cent. Resale prices will see an increase of just 0.9 per cent, down from 1.4, according to the report.

Here’s a look at forecasted price growth in Canada’s main municipal markets:





Québec City































































Fewer sales also mean a decrease in mortgage approvals – but only in the resale market; approvals are expected to increase 3.4 per cent for new home mortgages.

Provincial Markets Check In

 Atlantic Canada: Starts are in for a dip: while the eastern provinces have been enjoying recent growth in housing starts, it can’t be sustained; population growth just isn’t up to speed, and a strengthening economy won’t be enough to reverse the trend.

 Quebec: There will be a contraction in housing starts this year and next as a result of government cutbacks and a hesitating consumer base. However, both employment and income will boom in la belle province.

 Ontario: Starts will decline in 2013 for the first time in four years as developers react to declining consumer demand – but they’ll bounce back in 2014. Both the provincial economy and employment levels are in for a boost.

 Prairies: Canada’s breadbasket is experiencing the strongest growth in home pricing as economic growth, employment and demand increase.

 Alberta: The population continues to boom in the wild rose province, and housing starts reached a post-recession high in 2012, and are forecasted to grow this year and next. However, post-flood conditions could throw a wrench into market watchers’ plans, skewing both provincial and national numbers for months to come. Population growth will mean that starts stay strong, but market demand may shift for higher ground properties as Calgary’s population reacts to the possibility of future flooding. As well, rental vacancies are anticipated to reach absolute zero as displaced families turn to rent during recovery. This could prompt migrants to enter the market to buy sooner than they usually would, due to lack of rental options, further supporting the market.

British Columbia: The west coast continues to settle into balanced territory after a period of rapid growth, followed by huge post-CMHC rule change correction.

 Week In Review

There’s upward movement across the board this week, as Canadian and global government bond yields remain high in response to the U.S. Fed’s intention to scale back their bond buying program. The one-year fixed rate is up by 10 basis points to 2.39 per cent. Change in regard to the five-and-10-year fixed rates has been moderate, however, at six and four basis points, respectively. Variable five-year mortgage rates have also increased five basis points, back to 2.50 per cent.

Related Topics

Mortgage News / Mortgages

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