Broker talks recent trends
Mortgage agents and brokers across the country have seen a deluge of new calls from existing clients in recent weeks wanting to discuss their options – and that’s equally the case in Quebec, according to a broker based in the province.
Terry Kilakos (pictured), founder of North East Real Estate and Mortgage Agency, told Canadian Mortgage Professional that while a lot of borrowers had been holding fire on switching from a variable to a fixed rate in the year to date, the Bank of Canada’s latest rate hike had convinced many that now was the time to lock in.
“After the last announcement where the Bank of Canada raised, everyone is kind of scrambling and saying, ‘Let’s convert it,’” he said. “So we did get a little bit busier because of that.”
The period between January and March typically sees plenty of pre-approvals in the Quebec market – but that hasn’t been the case in 2023, with pre-approvals only starting to come through in April and May, according to Kilakos.
“Quebec has always been very predictable. You spend January, February, March working on pre-approvals and then people [purchase] in March, April, May, and then all of a sudden, everything’s closing in June and July,” he said. “This year, there wasn’t that at the beginning of the year – there wasn’t that rush of people getting pre-approved. The pre-approvals came later.
“So the whole year has shifted by almost two, three months. So it’s just a matter of seeing what the effects are going to be: are people going to convert those pre-approvals into purchases? And if they do, then we’re going to have a pretty good end to this year.”
Still, affordability remains a challenge for many would-be buyers, particularly among prospective new entrants to the market.
While the average property price in the province is considerably lower than in the likes of British Columbia and Ontario, average household incomes hover among the lowest in Canada, according to Canada Mortgage and Housing Corporation (CMHC), just above New Brunswick, Prince Edward Island, and Nova Scotia.
“Especially in Quebec, incomes are not as high as the rest of the country. And it’s impacting buyers a lot,” Kilakos said. “For someone that’s a single earner… who wants to buy a place, it becomes very, very difficult for them. If there are two people in the relationship, then it becomes a lot easier, but it has been a challenge.”
Solutions might include extending amortization periods for new buyers, Kilakos suggested, or removal of the stress test that requires mortgage applicants to prove they can absorb higher borrowing costs than their contract rate.
How is Bill 96 impacting the mortgage industry in Quebec?
One trend that’s unique to the Quebec market is the introduction of Bill 96, language legislation designed to protect the use of French in the province.
From June 1, adhesion contracts – non-negotiable documents drafted by a single party – can only be signed in a language other than French when signatories were first presented with a French version, a development that Kilakos said has had an impact in the mortgage space.
“With the new laws that have come in, notarial fees have gone up drastically because if you do want that stuff in English, there needs to be a secondary document that’s translated that you have for review,” he said.
Quebec's controversial Bill 96 has passed by a vote of 78-29, with the opposition Liberals and Parti Québécois opposing it.https://t.co/G3moPtXu6k
— Globalnews.ca (@globalnews) May 24, 2022
What’s in store for the rest of the year in Quebec’s mortgage market?
A quieter market may prevail in the summer, Kilakos said, although the recent flurry of pre-approvals could result in hotter activity when fall comes around.
“I think we’ll probably end up seeing a slowdown during the summer. But if all things remain equal and everything stays as is, I think that probably come September we’ll see an increase in demand,” he said. “A lot of these pre-approvals that we’ve been doing, they’ll probably end up converting over to actual purchases already.
“It’s an interesting year because I find we’re kind of in a transition period where people are getting reacclimated to the interest rates. All it’s going to take is for interest rates to come down a little bit or for there to be some sort of an announcement that real estate prices are moving up and then that’s going to force people to move and get back into the market and do what they need to do.”
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