The Latest Mortgage News and Findings in Canada

We’ve compiled the bevy of reports and surveys completed throughout the past two weeks in regards to borrowing, the financial state of consumers, and the real estate market. Read below for a breakdown and mortgage news of what’s going on in the aforementioned avenues:

Amidst Rigid Mortgage Rules, GTA Turning to Private Lenders

The Homeowners in the notoriously expensive GTA have little recourse other than turning to private lenders, particularly with today’s bolstered interest rates and stricter mortgage guidelines.

Realosophy and Teranet reported that 1/5 refinanced mortgages in Q2 were done through private lenders. It’s a jump of 67% compared to the two previous years, and an increase from $920 million all the way to $1.5 billion, and can be accredited to homeowners in their 30s and 40s (Gen Xers) who make up 42% of all private mortgage borrowers.

The report surmises that private lenders are more lenient towards construction financing than more traditional mortgage sources, and most Gen Xers prefer renovations in their current home.

Also, real estate investors may be utilizing private debt as a means to finance their investment. The increase in private financing was at its height in areas with the most investor demand, adding credence to the latter hypothesis.  

Housing Market Teetering Precariously

The CMHC has decried that Canada’s housing market is still very vulnerable, even with lower prices. The lack of demand in housing can be attributed to the tougher about mortgage rules, skyrocketing interest rates, and incomes not growing adequately enough at the rate of inflation.

There’s also the issue of overbuilding, overvaluation, overheating, and price acceleration in places like Toronto, Vancouver, Victoria, and Hamilton. These imbalances are drastically hindering the demand for real estate.

According to the report, Winnipeg’s inventory of unsold brand new units compiling continuously over the past two quarters is a large sticking point. On top of that, Montreal’s resale market may overheat with demand surpassing supply.

Toronto Homes More Expensive, Vancouver Homes Not Selling

Toronto homes are selling for 1% more from September to October at an average of $810,881, according to the Toronto Real Estate Board—an increase of 2.6% from this time last year.

The worrying lack of supply seems to be potentially tightening the market and contributing to new listings being down 2.7% from one year ago.

It is believed that the strong economy in Toronto and consistent population growth will continue to fuel the need for housing ownership moving towards 2019.

Vancouver is currently experiencing a 34.9% drop in homes sales from October of last year until now, but sales have increased 23.3% since last month according to the Real Estate Board of Greater Vancouver.

Interestingly enough, Greater Vancouver’s housing supply is up 7.4% from last year. This record high can be attributed to decreased sales and is the most supply Vancouver has seen in four years and offers homebuyers superior selection but more competition for sellers.

Homes in Greater Vancouver are showing a price decrease from 3% to 5%.

Reliance On HELOC a Cause for Worry

Canadians are over abundantly relying on Home Equity Lines of Credit, according to the FCAC.

80% of the 3 million HELOC accounts were held under readvanceable mortgages in 2016, and since then the lure of these mortgages has only shot up. One-quarter of HELOC holders just pay the interest on their lines-of-credit most months and 62% of them claimed they’d pay off their HELOC over five years.

Unfortunately, paying off the HELOCs in half a decade seems to be a pipe dream since the average balance is $70,000, calling for a need to give consumers a better financial education.

Finances Becoming a Mental Burden for Canadians

There’s no way to dress it up. The rate of Canadians panicking about finances is palpable. Capital One Canada and Credit Canada Debt Solutions accumulated information in a survey showing 30% of those surveyed say that financial stress is a bigger concern than their own overall health, and 44% claiming it’s burdening their mental health.

If the stats are correct, Canadians as a whole are fretting over finances an hour a day—the very same time we spend eating.

Finances are impacting Canadians to the point that 76% of the country has missed out on special experiences as a means to save, 56% claim they’ll make huge sacrifices to become debt free, while 60% say they’ve taken actions to remove financial stress.