The Year That Was and the Year to Come

Anita Groves • January 2, 2018

2017 is in the rear view mirror and the road to 2018 is directly in front of us! As starting a new year is a great time to gain some perspective, let’s reflect on some of the changes brought about this last year in the Canadian housing and mortgage market, and maybe speculate a little bit about what’s to come. Mortgage writer Steve Huebl from Canadian Mortgage Trends keeps on top of things quite nicely, here are a couple of his latest articles. Let’s look forward, first, then backwards!

The Latest in Mortgage News – 2018 Forecasts

It can be a chore to stay on top of the latest mortgage news these days, particularly given the barrage of forecasts and predictions for housing markets in 2018.

Unsurprisingly, the majority of forecasts for the year ahead have focused on OSFI’s new mortgage rules, including the mortgage stress test for all uninsured mortgages, which officially come into effect on January 1, 2018.

Here’s a sampling of some of the latest forecasts on where home sales and prices are headed in the new year and beyond, and the impact that the new B-20 mortgage rules are likely to have.

CREA Forecasts Drop in Home Sales

The Canadian Real Estate Association (CREA) came out with its latest home sales forecast for 2018, and now expects a 5.3% drop in national sales to 486,000 as a result of OSFI’s new mortgage regulations.

That’s about 8,500 sales lower from its previous forecast. The Association also expects home prices to drop 1.4% in 2018 to $503,100.

“With some homebuyers likely advancing their purchase decision before the new rules come into effect next year, the ‘pull-forward’ of these sales may come at the expense of sales in the first half of 2018,” CREA said in a statement.

“Meanwhile, other potential homebuyers are anticipated to stay on the sidelines as they save up a larger down payment before purchasing and contributing to a modest improvement in sales activity in the second half of 2018.”

Reuters Poll Points to Smaller Home Price Gains

A recent Reuters poll of analysts that found home prices are expected to grow just 1.9% in 2018 (vs. the 8.5% gain seen in 2017) due to the tougher mortgage rules and an expectation for further interest rate increases.

Toronto home prices are expected to cool to 2% in 2018 and rise to 3% in 2019, while Vancouver year-over-year price gains are still expected to hit 6% in 2018 before cooling to 4.6% in 2019.

A majority of the analysts surveyed said the new mortgage rules will have a “significant” impact on housing activity, though most noted that higher interest rates pose the biggest risk.

RE/MAX Outlook Points to Growth in the Suburbs

The 2018 Housing Market Outlook published by RE/MAX noted two distinct trends in 2017 that are expected to continue into 2018: the shift towards condo ownership in Canada’s highest-priced markets, Toronto and Vancouver, as well as a race to the suburbs for prospective homebuyers looking for better affordability.

In 2017, demand for condos in both Toronto and Vancouver continued to outpace supply, with prices increasing 16% and 22% year-over-year, respectively.

RE/MAX forecasts an overall 2.5% increase in residential sale prices in 2018 “as the desire for home ownership remains strong, particularly among Canadian millennials.”

CMHC Sees Moderating Home Price Increases

The Canada Mortgage and Housing Corporation (CMHC) is forecasting continued growth in home prices in its Housing Market Outlook , but at a more moderate pace.

It expects MLS average home prices to increase from a range of $493,900-$511,300 in 2017, to a range of $499,400-$524,500 by 2019.

CMHC also provided its forecast on expected interest rate increases over the near-term horizon: “In our baseline scenario, the posted 5-year mortgage rate is expected to lie within the 4.9%-5.7% range in 2018 and within the 5.2%-6.2% range in 2019.”

The Contrarian View

The folks over at CIBC don’t foresee OSFI’s new regulations having much material impact on the housing markets in both Vancouver and Toronto, at least not over the long run.

In case you missed the research note from CIBC’s deputy chief economist Ben Tal, he wrote that government efforts to cool the Toronto and Vancouver housing markets will do little more than soften Canada’s two most expensive housing markets.

“On the surface [the stress test for uninsured mortgages] reduces the purchasing power of typical buyers by close to 20%, and we estimate that no less than 10-15% of mortgage originations will be impacted by that move. However, the actual reduction in demand is likely to be much less significant,” Tal wrote. “We suggest that the combination of the creative imagination of borrowers, some exceptions to the rule and increased activity among alternative lenders will soften the blow to the market as a whole with actual demand slowing by only 5-7% in the coming year.”

Tal also cites supply constraints for new housing development, particularly in Toronto, along with long-term housing demand in Toronto and Vancouver from new immigrants and non-permanent residents as increasing price pressure over the long run.

2017 – A Year in Review

As we count down the final days of 2017, we look back on a year that presented fresh challenges for the mortgage industry with the announcement of yet more mortgage rule changes.

While OSFI’s B-20 changes dominated headlines during the later part of the year, here are some of the other top mortgage newsmakers for 2017:

Rate Movements

After two years with the overnight target rate stuck at 0.50%, the Bank of Canada began a new rate hike cycle with quarter-point increases in July and September, with more hikes widely expected in 2018.

The most important benchmark for fixed-rate pricing is the 5-year government bond and in 2017 we were reminded of how fast 5-year yields can climb.

Stock Moves

Finally, here’s a look at the performance of Canada’s big banks along with the public companies that make the majority of their revenue in the mortgage business.

¹ Discounted mortgage rates reflect estimates taken from the most competitive lenders’ rate sheets, as of December 31.

² RBC’s 5-year non-redeemable GIC with monthly interest is used as a proxy for GIC rates. In reality, some lenders have to pay notably more on their GICs than RBC.

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Anita Groves

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Bank of Canada Rate Announcement Jun 4th, 2025

By Anita Groves • June 4, 2025

Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario June 4, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high. While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase. China’s economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR. In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued. CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving. With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.

How Employment Status Impacts Your Mortgage Application

By Anita Groves • May 28, 2025

Chances are if you’re applying for a mortgage, you feel confident about the state of your current employment or your ability to find a similar position if you need to. However, your actual employment status probably means more to the lender than you might think. You see, to a lender, your employment status is a strong indicator of your employer’s commitment to your continued employment. So, regardless of how you feel about your position, it’s what can be proven on paper that matters most. Let’s walk through some of the common ways lenders can look at employment status. Permanent Employment The gold star of employment. If your employer has made you a permanent employee, it means that your position is as secure as any position can be. When a lender sees permanent status (passed probation), it gives them the confidence that you’re valuable to the company and that they can rely on your income. Probationary Period Despite the quality of your job, if you’ve only been with the company for a short while, you’ll be required to prove that you’ve passed any probationary period. Although most probationary periods are typically 3-6 months, they can be longer. You might now even be aware that you’re under probation. The lender will want to make sure that you’re not under a probationary period because your employment can be terminated without any cause while under probation. Once you’ve made it through your initial evaluation, the lender will be more confident in your employment status. Now, it’s not the length of time with the employer that the lender is scrutinizing; instead, it’s the status of your probation. So if you’ve only been with a company for one month, but you’ve been working with them as a contractor for a few years, and they’re willing to waive the probationary period based on a previous relationship, that should give the lender all the confidence they need. We’ll have to get that documented. Parental Leave Suppose you’re currently on, planning to be on, or just about to be done a parental leave, regardless of the income you’re now collecting, as long as you have an employment letter that outlines your guaranteed return to work position (and date). In that case, you can use your return to work income to qualify on your mortgage application. It’s not the parental leave that the lender has issues with; it’s the ability you have to return to the position you left. Term Contracts Term contracts are hands down the most ambiguous and misunderstood employment status as it’s usually well-qualified and educated individuals who are working excellent jobs with no documented proof of future employment. A term contract indicates that you have a start date and an end date, and you are paid a specific amount for that specified amount of time. Unfortunately, the lack of stability here is not a lot for a lender to go on when evaluating your long-term ability to repay your mortgage. So to qualify income on a term contract, you want to establish the income you’ve received for at least two years. However, sometimes lenders like to see that your contract has been renewed at least once before considering it as income towards your mortgage application. In summary If you’ve recently changed jobs or are thinking about making a career change, and qualifying for a mortgage is on the horizon, or if you have any questions at all, please connect anytime. We can work through the details together and make sure you have a plan in place. It would be a pleasure to work with you!