The recovery will "not just be like flicking a switch," according to the industry expert
George Hugh (pictured) knows a thing or two about markets from his previous professional life – and he’s preaching patience as the mortgage industry waits for this one to turn.
Prior to founding Taurus Mortgage Capital, the company he currently serves as president and CEO, Hugh worked as vice president, treasury and vice president, head of mortgage origination for ING Direct Canada. “I came from the capital markets side of the business,” he told Mortgage Broker News. “I wasn’t even involved in mortgage sales at all.”
The experience, he said, has given him a different perspective than most brokers on the state of the mortgage industry, providing an insight into market trends and how pricing takes place, and he’s adamant that mortgage professionals need to remain cautious as hopes rise for a return to normalcy.
“Getting back to a normal market is going to take a long time,” he warned. “Don’t think that everyone’s going to have their vaccine and the market is going to be operating the same way as before COVID-19. It’s not going to.”
Canadian consumer confidence is at its highest level since January 2018 amid a buoyant housing market and positive news on the vaccination front. Still, Hugh believes that overoptimism remains a risk, particularly with an end to the Canada Emergency Response Benefits (CERB) program in sight.
“When that stops, I think that’s going to really impact Canadians,” he said. “Right now, I believe there’s a false sense of security by Canadians making their mortgage payments, because they [may be] getting their CERB payments and using that to pay their mortgages. What happens when those payments stop for Canadians? I don’t think the liquidity issue is [over] for Canadians.”
While he described himself as “bullish” on the housing market – particularly in Ontario – Hugh believes brokers have a duty to keep their clients informed and educated on the possibility of economic recovery taking longer than initially envisaged. Indeed, it’s central to the business approach at Taurus.
“I’m not here just to deliver a mortgage; anybody can deliver a mortgage,” he said. “Our approach is that we have a wealth-building approach to all our clients. We educate [them] on every aspect of buying a home. We’ve always spent a lot of time with our clients explaining these things.”
That includes being honest with clients about rises in interest rates. Hugh described the recent increases in the lowest rates for five-year fixed rate mortgage products in Canada (their first rise since January last year) as “perfectly healthy”, dismissing concerns about this upward trend. In fact, mortgage rates, he said, are “already way too low.”
In Hugh’s eyes, brokers need to be frank with their clients. “If you’re not going to be buying a house [just] because it has a 2% [interest rate], you shouldn’t be buying a house.”
With that in mind, Hugh warned brokers against taking a “transactional” approach and not caring for the wellbeing of their clients. That includes keeping them aware of how long it might take for an economic upturn to begin. “The recovery is on its way, but it’s not like flicking a switch overnight,” he said. “We have to prepare our clients for the market we’re in. We’ve got to educate our clients on what’s happening.”
The housing market, he said, “is the only thing moving right now, and the housing market is actually overstimulating the economy.” That, he believes, will take time to change.
Hugh pointed to a potent example of the need for caution: clients who bought a house and were laid off due to the pandemic, before returning to work and securing a mortgage.
“What happens if they get laid off again because something [pandemic-related] happens again?” he said. “How do they pay their mortgage? We’re not out of this yet.”
