Mortgage update from Jake!

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Written on January 30th, 2020

Jake is back in 2020 with a fantastic write up for what to expect in 2020. Take a read:


“2019 was now 3 years removed from the stress-test and I think we can all say that the market has adjusted to it by now. People’s buying habits shifted primarily to condos (both end-users and investors) and although the outlying regions (think: 905) suffered a little bit, things have been back and 2017 to 2018 almost feels like the housing market was “on sale”. I know when comparing what people are buying today vs what they bought 1-2 years ago, the ‘deal’ they got is almost gone.

Here are some things I am keeping my eye out on for 2020. These are not predictions, these are things that I’m keeping my eye on:

  1. Interest rates have no sense of direction. The Bank of Canada held firm on rates yet again January 22nd but did leave the door open to a decrease in 2020. Bay St traders have said there’s a 50/50 chance of this happening. I’ll be shocked if it doesn’t because we are going into some major economic headwinds and the new virus issue is going to create a global slowdown. This is also leading to fixed rates falling which will ONLY help the Spring housing market. The bond market which prices fixed rates has literally fallen off a cliff. This will lead to a .1-.3 reduction in rates in the next little while so pre-approval rate holds are (currently) not relevant.
  2. The Stress Test might change but don’t be alarmed, or, don’t pop the champagne. IF the change happens it will be so absolutely minute that it’s like them saying “see! We did something, and you should be happy”. What I am hearing is the rate will change from not the higher of the +2% or the 5-year posted rate but the lower of the two. How will this impact borrowers? An average borrower with less-than 20% down could borrow 8% more under this new rule. Not a whole lot but … maybe every bit helps?
  3. Consumer insolvencies are at an all-time high. This is alarming because a higher rate of insolvencies will lead to less spending (obviously) but also less consumer confidence. I believe two things drive our housing market: Being CONFIDENT in your financials, and LOW RATES. We’ll have the latter, but will we have the former?
  4. Shared equity mortgages – kind of like the CMHC- program are becoming more popular with two new start-ups launching in the GTA very soon. We don’t know the details, we don’t know who the lenders are that will participate, but we do know that there’s enough risk appetite for this kind of thing which will ONLY help those buyers who do not have satisfactory down payments but who can afford their mortgages. Time will tell if this concept will take off in 416/905 but I can tell I’ve had 1 deal with the CMHC Shared Equity program this year. Looks like most people don’t want to give up any equity! Oh and the CMHC program has thus far had only $55,000 of $1.25B applied for (and approved). That means only 4% of the allocated budget is being spent. Yay CMHC! Good one!
  5. Ten Year Mortgages are soon going to be more popular. If the Government changes the above-mentioned stress-test, they will do this: Anyone who wants 5 years or less qualifies at the current rules. Anyone who wants to go longer-term will qualify at easier rules. I can bet you $100 that this is what they are doing. How do I know this? 1) The Bank of Canada talked about 10 year mortgage products late in 2019. 2) The Bank of Canada is now buying 10 year bonds to bring the yields down. This is 1+1=2 math. Simple to see what is going on.

So all-in-all I think 2020 will be a crazy good year for everyone in real estate: investors, buyers & sellers.

If you have a personal mortgage to discuss, let’s do an annual review of your finances.  In the meantime, I look forward to hearing your comments, questions.

Thanks kindly,

Jake AbramowiczE: Jake@mortgagejake.comC: 416 910 4448