Latest in Mortgage News, COVID-19, and Economic Recovery
Victor Anasimiv • June 24, 2020
Although the volume of news over the last month has been pretty tame in comparison to when COVID-19 initially hit, there has still been a lot going on. If you find yourself wondering about the current state of affairs as it relates to real estate, mortgage financing, and the recovery of our economy mid and post-pandemic, you’ve come to the right place!
Here is a quick recap, a look forward, and links to many good sources of information!
Questionable economic outlook.
Back in the third week of May, the head of the Canadian Mortgage and Housing Corporation (CMHC) made some pretty gloomy predictions.
These Included a potential decrease in house prices of 18%, a jump in mortgage deferrals by 20% from 12% by September, and a debt-to-GDP ratio jump from 99% to 130% by Q3.
However, this particular economic outlook wasn’t widely accepted in the mortgage industry and was seen more as an absolute worst-case scenario. Despite this, CMHC went ahead and made changes to their underwriting guidelines
and qualifying criteria for insured mortgages.
CMHC changes policy for insured mortgages.
On June 4th, 2020, CMHC announced that they would be making changes to their underwriting qualification effective July 1st 2020.
Essentially, they have lowered the buying power of anyone looking for an insured mortgage by up to 10% by limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to 35% and 42% respectively. They changed the credit score requirements to a minimum of 680 for at least one borrower. While they also removed non-traditional sources of down payment that increase indebtedness, (borrowed downpayment). A gifted downpayment from a family member is still acceptable.
Genworth and Canada Guaranty don’t plan on changing guidelines.
In response to CMHC’s changes, the other two mortgage insurers in Canada made announcements that they would not be changing their guidelines.
“Genworth Canada believes that its risk management framework, its dynamic underwriting policies and processes and its ongoing monitoring of conditions and market developments allow it to prudently adjudicate and manage its mortgage insurance exposure, including its exposure to this segment of borrowers with lower credit scores or higher debt service ratios,” said Stuart Levings, President and CEO.
“Canada Guaranty confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements… Given implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults.”
So although CMHC is taking a very pessimistic view towards our economic recovery and has made it harder to qualify for an insured mortgage going forward, Genworth and Canada Guaranty will be there to make sure more Canadians have access to insured mortgage products.
Economic Outlook from the Bank of Canada.
On June 22nd, Tiff Macklem, the new governor of the Bank of Canada, released his first public press release called Monetary Policy in the Context of COVID-19.
“Currently, we expect growth to resume in the third quarter. The economy will get an immediate boost as containment measures are lifted, people are called back to work, and households resume some of their normal activities. But it will be important not to assume that these growth rates will continue beyond the reopening phase. The pandemic is likely to inflict some lasting damage to demand and supply. The recovery will likely be prolonged and bumpy, with the potential for setbacks along the way.”
Conference Board of Canada.
In a sizeable release, the Conference Board of Canada shared their Canadian Outlook Summary: Summer 2020.
“With the worst of the recession likely over, the outlook for 2021 is brighter. The economy is forecast to rebound by 6.7 per cent in 2021 and 4.8 per cent in 2022. As the threat of the pandemic eases, how well the reopening of the economy and the withdrawal of government support is managed will be a crucial determinant of the economy’s trajectory over the next several years.”
Business as usual.
By all accounts, it’s business as usual amid this global pandemic. Although COVID-19 has impacted the number of houses being bought and sold, prices haven’t dropped. CMHC has made it harder to qualify for an insured mortgage through them, but you have two other insurers providing options, so it’s not a big deal.
If you’re looking to make a move or need to discuss mortgage financing, please don’t hesitate to contact me anytime. I would love to work with you!
Thinking About Selling Your Home? Start With These 3 Key Questions Selling your home is a major move—emotionally, financially, and logistically. Whether you're upsizing, downsizing, relocating, or just ready for a change, there are a few essential questions you should have answers to before you list that "For Sale" sign. 1. How Will I Get My Home Sale-Ready? Before your property hits the market, you’ll want to make sure it puts its best foot forward. That starts with understanding its current market value—and ends with a plan to maximize its appeal. A real estate professional can walk you through what similar homes in your area have sold for and help tailor a prep plan that aligns with current market conditions. Here are some things you might want to consider: Decluttering and removing personal items Minor touch-ups or repairs Fresh paint inside (and maybe outside too) Updated lighting or fixtures Professional staging Landscaping or exterior cleanup High-quality photos and possibly a virtual tour These aren’t must-dos, but smart investments here can often translate to a higher sale price and faster sale. 2. What Will It Actually Cost to Sell? It’s easy to look at the selling price and subtract your mortgage balance—but the real math is more nuanced. Here's a breakdown of the typical costs involved in selling a home: Real estate agent commissions (plus GST/HST) Legal fees Mortgage discharge fees (and possibly a penalty) Utility and property tax adjustments Moving expenses and/or storage costs That mortgage penalty can be especially tricky—it can sometimes be thousands of dollars, depending on your lender and how much time is left in your term. Not sure what it might cost you? I can help you estimate it. 3. What’s My Plan After the Sale? Knowing your next step is just as important as selling your current home. If you're buying again, don’t assume you’ll automatically qualify for a new mortgage just because you’ve had one before. Lending rules change, and so might your financial situation. Before you sell, talk to a mortgage professional to find out what you’re pre-approved for and what options are available. If you're planning to rent or relocate temporarily, think about timelines, storage, and transition costs. Clarity and preparation go a long way. The best way to reduce stress and make confident decisions is to work with professionals you trust—and ask all the questions you need. If you’re thinking about selling and want help mapping out your next steps, I’d be happy to chat anytime. Let’s make a smart plan, together.
Sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn’t mean your life is over, and it doesn’t mean you won’t ever qualify for a mortgage again. The key to financial success here is getting things under control as quickly as possible. You must demonstrate to the potential lenders that what happened in the past won’t happen again in the future. So if you’re thinking about getting a mortgage post-bankruptcy, lenders will want answers to the following questions: How long have you been discharged? Securing a mortgage will be dependent on how long it has been since you were discharged from your bankruptcy or consumer proposal. Most lenders consider the discharge date on both to be your new ground zero. And while there is no legally defined waiting period for when you can apply for a new mortgage post-bankruptcy, what lenders will assess is how you’re managing your finances after your financial troubles. Have you established new credit? You can show lenders that they can trust you after bankruptcy by establishing new credit and managing that credit flawlessly. So as soon as you’ve been discharged, it’s a good idea to get a secured credit card and start rebuilding your credit score. To be considered completely established, you’ll want to have two years of credit history on two trade lines with a credit limit of $2500 on each trade line. You’ll also want to make sure that you have no late or missed payments. How much do you have available for a downpayment? The more money you have to put towards purchasing a property, or the more equity you have in your property in the case of a refinance, the better your chances of getting a mortgage. The more money you bring to the table, the more comfortable a lender will feel about the risk they take of losing their investment should you run into future financial difficulty. What is your total debt service ratio? Another consideration lenders will look at is how much money you make compared to the cost of making your mortgage payments. So it probably goes without saying that the more money you make compared to the amount you want to borrow, the better. Conventional or insured financing. If you’re looking to get the best mortgage products available, here are some of the things a lender will want to see: You’ve been discharged for at least two years plus a day. You’ve established your credit (as listed above). You have at least 5% down for the first $500k of the purchase and 10% down for anything over $500k. If you don’t have a 20% downpayment, you will be required to secure mortgage insurance through CMHC, Sagen (formerly Genworth), or Canada Guaranty. The cost to service the property and all your debts don’t exceed 44% of your gross income. Alternative lending As independent mortgage professionals, our job is to provide solutions and strategies for our clients. As such, in addition to dealing with many traditional lending institutions, we also have access to lenders who specialize in working with clients whose financial situation isn't all that straightforward. These private lenders offer alternative lending solutions that consider the overall strength of your mortgage application. While you won’t qualify for the best rates and terms on the market by going with an alternative lender, if you’re looking for options, you might find that alternative lending is a very reasonable solution for you. Alternative lending isn’t for everyone, but it’s an excellent solution for some, especially if you’ve gone through a bankruptcy or consumer proposal and need a mortgage before fully establishing your credit. Get in touch anytime. So whether you’re looking for a plan to help you qualify for a mortgage with the most favourable terms or if you need something more immediate. Please connect anytime. It would be a pleasure to outline your options and work on a plan to get you a mortgage.
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.
