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The Latest in Mortgage News – Government Policy & Housing Data

With the arrival of the new year came the official start of OSFI’s new mortgage regulations.

And the latest national home sales data suggests a significant number of Canadian homebuyers snuck in just under the wire and purchased homes before the new stress test rules took effect.

This isn’t the only example of government policy affecting Canada’s housing market. Earlier this month the Toronto Real Estate Board suggested Ontario’s new housing rules (which include a foreign buyer’s tax) was largely responsible for a double-digit decline in annual home sales last year.

More on these and other recent news items below…

Bump in December Home Sales

The Canadian Real Estate Association’s December home sales data showed a 4.1% increase compared to a year earlier, while the average home price rose 5.7% to $496,500.

Many suspect the surge in sales was partly due to homebuyers rushing to make their purchase before OSFI’s new mortgage regulations took effect January 1, requiring uninsured mortgages to be stress tested.

“National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year,” said Gregory Klump, CREA’s Chief Economist.

That likely means a slowdown in home purchases to start off 2018, according to some experts.

“The new OFSI measures and a shift to a rising-rate environment should prevent speculative froth from building again, and contain price growth to a reasonable pace for the remainder of the cycle,” wrote senior BMO economist Robert Kavcic.


Ontario Housing Rules Blamed for 18% Drop in GTA Sales

Earlier this month the Toronto Real Estate Board (TREB) blamed the Ontario Government for the 18% drop in home sales in 2017.

In April, the Ontario Government introduced 16 measures to cool the overheating real estate market in the Greater Toronto Area (GTA), including a 15% tax on home purchases made by non-residents.

“Much of the sales volatility in 2017 was brought about by government policy decisions,” TREB president Tim Syrianos said in a statement. “Research from TREB, the provincial government and Statistics Canada showed that foreign home buying was not a major driver of sales in the GTA. However, the Ontario Fair Housing Plan, which included a foreign buyer tax, had a marked psychological impact on the marketplace.”

TREB reported 92,394 home sales in the GTA last year, which was down from a peak of 113,040 in 2016. The board also reported a decline in prices for certain segments of the market. Detached home prices were down year-over-year by 2.5% to an average of $989,870, while condo prices were up 14.4%.


Canadians Concerned About Rate Hikes

Just ahead of last week’s Bank of Canada interest rate hike CIBC released a poll that found a majority of Canadians are concerned about the impact rising rates will have on their finances.

The poll found that while 77% of respondents were optimistic about their financial situation, 59% admitted they would feel “significantly less” confident if rates go up again.

“Given that household debt remains at record highs, it’s no surprise that Canadians are concerned about even the slightest change that might affect their finances,” said Jennifer Hubbard, CIBC’s Managing Director, Financial Planning and Advice.

With OIS markets still fully pricing in 50 bps of tightening by the end of the year, those worries likely won’t subside any time soon.


RateHub Secures $12M Investment

Mortgage rate comparison website RateHub announced last week that it had secured a $12-million investment from Elephant Partners LP, a venture capital firm based in Boston.

RateHub co-founder Alyssa Furtado, who put the company in the spotlight during her 2016 appearance on CBC’s Dragon’s Den, said Elephant’s investment “will be a tremendous asset in accelerating RateHub Inc.’s future growth.”

A RateHub spokesperson wouldn’t confirm what percentage of the company was purchased for the $12-million investment. However, in a comment to the Globe and Mail, Furtado stated this round of financing values the company at a level “many times” the $14 million Dragon’s Den deal she ultimately turned down.

The funds will be used to build a digital platform where homebuyers can complete the entire mortgage process online, while also expanding its other verticals, including credit cards, deposits and insurance, according to the company’s press release.