Rising interest rates and B-20’s are the likely culprits
Mortgage originations in British Columbia fell by a quarter during Q1-2019 compared to the same period last year, demonstrating B-20’s caustic impact on the housing market.
The 21,000 new mortgage loans were 24.7% below what they were through the first three months of 2018, according to a Canada Mortgage and Housing Corporation report.
“There could be a couple of different reasons: the interest rate had been rising and there are tighter mortgage rules, and as a result some consumers might not be qualified for mortgage loans,” said Pershing Sun, CMHC’s senior analyst of economics for British Columbia.
Home equity line of credit use in the province was relatively stable during this year’s first quarter, declining by only 0.1% for an average balance of $124,000. But while fewer British Columbians used their HELOC limits, delinquency rates still rose.
“The average is somewhat stable and there was only a slight decline, but it could be due to the fact that people who can’t access new loans are relying on HELOC loans,” said Sun.
However, delinquencies in Vancouver and Victoria remained below both the national and provincial averages.
New mortgage loans in Ontario also declined, as the 63,000 originations were 12.3% lower than during Q1-2018. At $318,000, the average balance only declined by 0.3% year-over-year.
“Overall, the volume of mortgage activity continued to grow at a slower pace relative to recent years, partly reflecting lower housing market activity,” said CMHC’s Ontario report.
HELOC usage in the province rose 2.2% for an average balance of $96,000. The delinquency rate (0.11%) rose negligibly (0.01%).
“People are cashing in on their home equity gains, but the inherent risk is that the more debt you have the more susceptible you are to shocks in the long run,” said Jordan S. Nanowski, CMHC’s senior market analyst for Ontario. “That being said, taking a HELOC is a personal decision and people have been handling them quite well because delinquency rates are quite low.”
