Industry and consumers can expect a less stressful 2018
By all indications, 2017 has proven to be a tumultuous period in the mortgage and real estate spheres, but a markets observer argued that this year will offer a measure of respite to these beleaguered sectors as well as to a consumer base labouring under an ever-increasing debt burden.
In a recent analysis, James Laird – co-founder of RateHub Inc. and president of CanWise Financial – predicted that no new federal-level mortgage regulation will be introduced in 2018.
“Over the past several years there has been a steady flow of new regulation imposed on the mortgage industry. Maximum amortizations have been reduced, minimum down payments have increased and stress tests have been added. Some are worried that current regulation has gone too far, which is why the federal regulators will take a break in 2018,” Laird stated.
He also projected that variable and fixed rates will experience a modest rise, at best. “The Bank of Canada will increase the key overnight night rate by 0.5% causing all variable rates to rise. This will put upward pressure on bond yields which will cause fixed rates to rise as well.”
“In 2017 the Bank of Canada moved the key overnight rate twice, but it still remains historically low. The Canadian economy is doing well, so the Bank of Canada will choose a modest strategy of two rate increases, with a few months in between each move,” Laird added.
Read more: CREA slashes 2018 sales forecast amid tighter regulations
In addition, home prices are expected to remain relatively steady, neither increasing nor decreasing drastically.
“The macroeconomic factors that have been driving price appreciation will persist in 2018. Net new immigration, scarcity of housing supply, economic growth and first time home buyers entering the market will put upward pressure on housing prices,” Laird explained. “However, the new stress test that comes into place on January 1, 2018, combined with rising interest rates, and recently introduced foreign buyers taxes will act as an effective counter-balance, causing no net-change.”
Unfortunately, the number of Canadians that will be forced to borrow from unregulated lenders will only increase this year, Laird warned.
“All of the recently added regulation combined with the [OSFI stress test] will cause more Canadians to borrow from unregulated lenders at higher rates. Canadians who need to refinance and no longer qualify will be forced this way, while some who are looking to purchase and no longer qualify with a regulated lender will choose to go this way.”
Related stories:
Economists baffled at Canada’s condo boom
New rules will further feed hunger for unregulated lending options
In a recent analysis, James Laird – co-founder of RateHub Inc. and president of CanWise Financial – predicted that no new federal-level mortgage regulation will be introduced in 2018.
“Over the past several years there has been a steady flow of new regulation imposed on the mortgage industry. Maximum amortizations have been reduced, minimum down payments have increased and stress tests have been added. Some are worried that current regulation has gone too far, which is why the federal regulators will take a break in 2018,” Laird stated.
He also projected that variable and fixed rates will experience a modest rise, at best. “The Bank of Canada will increase the key overnight night rate by 0.5% causing all variable rates to rise. This will put upward pressure on bond yields which will cause fixed rates to rise as well.”
“In 2017 the Bank of Canada moved the key overnight rate twice, but it still remains historically low. The Canadian economy is doing well, so the Bank of Canada will choose a modest strategy of two rate increases, with a few months in between each move,” Laird added.
Read more: CREA slashes 2018 sales forecast amid tighter regulations
In addition, home prices are expected to remain relatively steady, neither increasing nor decreasing drastically.
“The macroeconomic factors that have been driving price appreciation will persist in 2018. Net new immigration, scarcity of housing supply, economic growth and first time home buyers entering the market will put upward pressure on housing prices,” Laird explained. “However, the new stress test that comes into place on January 1, 2018, combined with rising interest rates, and recently introduced foreign buyers taxes will act as an effective counter-balance, causing no net-change.”
Unfortunately, the number of Canadians that will be forced to borrow from unregulated lenders will only increase this year, Laird warned.
“All of the recently added regulation combined with the [OSFI stress test] will cause more Canadians to borrow from unregulated lenders at higher rates. Canadians who need to refinance and no longer qualify will be forced this way, while some who are looking to purchase and no longer qualify with a regulated lender will choose to go this way.”
Related stories:
Economists baffled at Canada’s condo boom
New rules will further feed hunger for unregulated lending options
