The Bank of Canada has released mortgage credit figures for June, and it is overwhelmingly positive. This is indicative of an improvement in mortgage growth and follows an unusually darker phase in the country’s real estate sector. While this growth is slower than desired, especially when compared to previous years, it is still a step in the right direction.
Still on this subject matter, this excerpt from Betterdwelling.com should provide some pointers on what this means:
The annualized pace of growth is pointing towards more potential growth, at least near-term. The 3-month annualized growth reached 4.3% in June, an increase of 38.70% from the same period last year. This represents a 16.21% increase compared to the current 12 month rate of growth. To clarify, this doesn’t mean the growth rate will necessarily reach 4.3% soon. Instead it means there’s more seasonal pressure moving the annual rate higher. Whether this carries into the fall and winter will be a completely different story. The 3-month annualized rate could collapse and bring the trend lower, but it would have to be a steep drop. There’s enough room for it to fall a little, and still drag the 12-month higher. via betterdwelling.com
According to the excerpt below from Livabl.com, the cause of this growth can be traced:
They also cite mortgage stress testing that federal policymakers introduced in January 2018. The rules, drafted by the Office of the Superintendent of Financial Institutions, a financial-sector watchdog, set a higher bar for uninsured-mortgage applicants through a new stress test. The test requires these borrowers to qualify at a rate that is either 200 basis points higher than what’s on their contract or matches the Bank of Canada’s qualifying rate — whichever is higher. via livabl.com
Despite this growth, the mortgage debt continues to rise reaching new heights with figures for June released this month. Again, Betterdwelling.com reels out some BoC figures concerning the mortgage debt situation:
Canadian mortgage debt topped a new record, as growth picked up a little last month. The outstanding balance of mortgage credit reached $1.57 trillion in June, up 0.57% from last year. The balance is now 3.7% higher than the same month last year. The annual rate of growth is an improvement over what we’ve been seeing over the past few years. via betterdwelling.com
If you are unsure of what the mortgage stress test is all about, this excerpt from Zoocasa.com sheds some light:
In early 2018, the Office of the Superintendent of Financial Institutions (OSFI) implemented a mortgage stress test that requires home buyers to qualify at a mortgage rate that is the higher of the Bank of Canada’s benchmark rate or two additional percentage points to their contract rate.
The stress test was put in place to ensure Canadians don’t take on any mortgage debt that they couldn’t be able to pay off, in the event of future rate increases. It essentially forced home buyers to purchase more affordable houses than they could have previously qualified for.
In real terms, this means that a home buyer who gets a five-year fixed-rate mortgage of 2.54% (currently the best mortgage rate in Ontario) would have to prove to their lender that they could qualify for the Bank of Canada’s benchmark rate. via zoocasa.com
With the growth in mortgage credit, there appears to be a silver lining. If this could see a decrease in reverse mortgage debt, then the stunning heights of 2017 would no longer feel like a mirage. For now, we can only be optimistic about developments in the real estate sector.