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Mortgage News – Canada Mortgage News Summary

General Jonathan Silveira 26 May

Industry News 

The Bank of Canada should raise interest rates “without delay” and continue to gradually hike throughout this year and next, the OECD said today.

 The recommendation comes just six days before central bank officials announce a decision on whether to boost its key lending rate from a record low.

 Strategists had thought, until lately, a June 1st rate hike was a done deal after a string of stronger-than-expected Canadian economic reports. That certainty has ebbed, though, as European debt problems shake global confidence. The OECD, for its part, thinks the central bank should act swiftly to raise rates. 

 Click here to read more in the Globe and Mail.

 The Canadian Real Estate Association (CREA) released a new report today indicating that home prices will stabilize, and remain stable for some time.

 This means that Canadian homeowners are unlikely to experience a US-style decline in the value of their homes.

 “The relationship between average price and income has recently been cited as portending a US-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

 Click here to read the CREA report.

 Home prices in Canada are overvalued by 14%, while affordability is eroding dramatically in some parts of the country, say two new reports on the state of the housing market. 

 “When it comes to prices, by almost any measure, Canadian home prices are overshooting their fair value,” CIBC Senior Economist Benjamin Tal said in a report Tuesday. “The pace of appreciation has been quicker than justified by housing market fundamentals.”

 The bank says the average price of a home has risen by almost 23% since the cyclical low of January 2009, and about 7% above recession levels.

 As a result, at least 1.5 million homes across Canada are overvalued, particularly in Western Canada, and a price drop of 5% to 10% over the next 12 months would not be unlikely, said Tal. 

 Click here to read the full article in The Star.

 The Alberta government has lashed out at federal plans unveiled today to create a new national securities regulator, saying Finance Minister Jim Flaherty is usurping provincial authority to change Canada’s regulatory system without any evidence the current system is broken.

 Just hours after Flaherty released a proposed new national securities act as a blueprint to create a new national regulator to replace Canada’s patchwork of 13 different provincial and territorial securities commissions, Alberta Finance Minister Ted Morton said his province will oppose the government’s efforts to act “unilaterally” in an area of provincial jurisdiction. 

 “If we open the door to federal intrusion in this area, we will be potentially inviting intrusion into other areas of provincial jurisdiction government finance, such as insurance, pensions and financial institutions,” Morton said.

 Click here to read the proposed Canadian Securities Act.

 Click here to read the full Globe and Mail article.

 Why do people default on mortgages and other loans? It turns out that it’s not so much the amounts they owe, but that they are unable to do the math that tells them exactly what their financial situation looks like. 

 Lack of ability to add turns out to be a cause of many consumer insolvencies. The damage caused by failure to do sums becomes evident when people find themselves in credit counselling. 

 “The common characteristic of people in serious debt is that they don’t know how to budget or track expenses,” says Sandra Sherk, Executive Director of the Credit Counselling Service of Ontario’s Durham Region. “They let what they owe and incidentals get ahead of them.”

 Click here to read more in the Financial Post.