Tough Sledding: The mortgage industry will remain under pressure “over the near-term as employment trends weaken, credit loss provisioning moves higher, and housing / mortgage activity pulls back materially,” TD says. If government subsidies disappear in 2021, the bank projects 50% higher mortgage defaults industry-wide, peaking in first quarter 2021. But the overall arrears level will stay below the historical average of 0.38%, it estimates. As for new mortgage business, the bank sees mortgage originations tumbling by 35%-40% both this quarter (Q2) and next (Q3), with a mortgage recovery starting in the fall.
Fixeds Drift Lower: Fixed rates keep dropping at big banks. We’re down to 2.69% or less on an uninsured5-year fixed. That’s a gargantuan +226 bps above the 5-year bond yield. In normal markets, +150 bps is routine for discounted rates. That means two things: (A) risk premiums are still inflated, thus boosting lender costs, and (B) lenders nonetheless have room to trim fixed rates further.
Suppressed Demand: “I have a lot of people who are waiting to put their house on the market or waiting to transact when this is all over. There will be that pent-up demand in the future.”—Ontario Real Estate Association President Sean Morrison
Quotable: “It has been almost 30 years since the last Canadian housing downturn (early 1990s) as we think the Global Financial Crisis housing downturn in Canada was very brief (approximately September 2008 to March 2009),” notes RBC Capital Markets. It says, “…It is unlikely that we will see a material increase in delinquency rates until mortgage deferrals expire.” That expiry will occur this fall for most people who have an approved payment deferral.
Like news like this?
Join our ratespy update list and get the latest news as it happens. Unsubscribe anytime.
Banks are going to have to discount more if they hope to maintain market share. They are fighting hard right for renewal business but rates for new customers don’t seem so great. In the broker market I see some lenders so desperate to make up for lost business they are dropping rates multiple times in one week.
““I have a lot of people who are waiting to put their house on the market or waiting to transact when this is all over. There will be that pent-up demand in the future.”—Ontario Real Estate Association President Sean Morrison
As loathe as I am to put too much weigh on predictions from real estate industry insiders, I have a feeling that they’re right on this one. Many people who wanted/needed to move, and who are still capable of purchasing, will jump back into the market at the point they’re convinced prices won’t fall further. How far out is that point? That remains to be seen.
log in
2 Comments
Banks are going to have to discount more if they hope to maintain market share. They are fighting hard right for renewal business but rates for new customers don’t seem so great. In the broker market I see some lenders so desperate to make up for lost business they are dropping rates multiple times in one week.
““I have a lot of people who are waiting to put their house on the market or waiting to transact when this is all over. There will be that pent-up demand in the future.”—Ontario Real Estate Association President Sean Morrison
As loathe as I am to put too much weigh on predictions from real estate industry insiders, I have a feeling that they’re right on this one. Many people who wanted/needed to move, and who are still capable of purchasing, will jump back into the market at the point they’re convinced prices won’t fall further. How far out is that point? That remains to be seen.