A Half Million Mortgage Deferrals: That’s what banks are up to now, says the Canadian Bankers Association. And that doesn’t include non-bank lenders. More than 10% of Big 6 bank borrowers are now skipping/deferring mortgage payments, a number the CBA says will “increase over the coming weeks.” All told, deferrals have freed up $663 million of monthly cash flow for Canadian families, it adds.
Lenders Breathing Easier: Bank funding costs got extreme there for a while. But thanks to government intervention, they improved further today—as measured by things like deposit note spreads, banker’s acceptance yields and Canada Mortgage Bond yields, among others. Don’t pay attention to that jargon, just know this: less upward pressure on funding costs means less upward pressure on mortgage rates. In fact, we’ve now seen a few fixed-rate reductions in the last few days. Had the government instead followed its 2008 financial crisis playbook and been late with liquidity support, we’d be writing a very different story right now. Fortunately for borrowers, Ottawa’s foresight has kept this a crisis, and not a tragedy.
motusbank hikes: For much of the last year, motus has jockeyed for top spot among lenders for the lowest national rate on various uninsured mortgage terms. But recently it’s stepped way back. Today, motusbank fixed rates all jumped another 15 bps, from 2.79% to 2.94%.
Short-term Strain: “We know every property on the market right now is in a critical situation to sell,” says Christan Bosley, COO of Bosley Real Estate. TRREB says demand could return to Toronto housing “throughout the fall and into the winter” if “we see a peak in COVID-19 infections in the spring followed by a loosening of social distancing measures starting in the mid-to-late summer.” (Toronto Star story)
Watching Prices: Like many Canadians, mortgage pros are waiting to see if COVID-19 knocks down home prices. April data will give us good clues on that, but we have to wait until early May for it. The Toronto Regional Real Estate Board offered some early insight today into what’s happening in the GTA. It writes, “The average selling price for sales reported between March 15 and March 31, was $862,563 – down from the first half of March 2020…”
Duplicate Submissions: Many mortgage brokers have been sending the same customer applications to multiple lenders. They’re doing that to lock in rate holds and protect their clients from lenders who may not issue approvals for unforeseen COVID-related reasons, or decide to not close a client’s mortgage as expected. None of these concerns are playing out on any wide scale at the moment, and all these duplicate submissions are causing 300%+ year-over-year spikes in application volumes at some lenders—slowing down the approval and closing system for all borrowers.
A Price to Pay: The price of government COVID-19 relief efforts could be above-target inflation, says former BoC Governor David Dodge. He supports the government’s response, but has two valid concerns, noting that:
“We’re printing a lot of money to provide liquidity in the system. Every country has issues when they print money.”
“You’ve cranked up domestic demand [via stimulus] without supply to meet it…” Here’s the full Globe story (sorry, it’s paywalled).