Residential Market Commentary – week of December 19, 2016

THINK OUTSIDE THE BOX:  Lots of news this week regarding mortgages and real estate.

It was a week chalked full of mortgage and real estate news: the U.S. Fed finally upped its rate, CREA released its November numbers, British Columbia unveiled interest free loans for first time buyers, StatsCan released the latest debt-to-income figures and the Bank of Canada continued to express concerns about overheated housing markets.

The central bank’s Financial System Review and BoC Governor Stephen Poloz both highlighted on-going warnings about the dangers of growing debt ratios which now stand at nearly $1.67 for every $1.00 of disposable income.  Total debt has now surpassed $2 trillion and two-thirds of it is mortgages.

The Bank continues to point to super low interest rates as the main driver of debt.  At the same time Governor Poloz has made it clear there will be no rate increases here in the near future, and there is still an opening for a rate cut.

In a separate report the BoC focused on the growing use of non-bank mortgage lenders.  While recognizing that the new federal mortgage rules affect competitiveness and leave borrowers with fewer options, the Bank endorses the moves as a way to cool overheated markets.  The report does express concerns that borrowers may now turn to riskier lenders such as private investors or mortgage investment firms.

Maria Broekhof      First National      December 20, 2016

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