Click here to join our mailing list to receive the latest news and updates as they happen. Unsubscribe any time.

The Latest in Mortgage News: Half of Canada’s Big Housing Markets Are Unaffordable

A new study of 15 major urban centres across Canada shows that housing unaffordability continues to be a major concern in nearly half of those markets.

housing affordabilityA median-income earner wouldn’t qualify for a mortgage large enough to fund their home purchase in seven key markets, including the Greater Vancouver and Toronto areas, Victoria, Hamilton-Burlington, Kitchener-Waterloo and London-St. Thomas, according to a newly released report from Zoocasa.

Instead, buyers there would need to supplement the mortgage with a “hefty” down payment, the report notes. In Vancouver, for example, a median-income earner making $72,662 would qualify for a mortgage of $241,994about $751,300 less than the average home price.

“That would take a household setting aside 20% of their income annually a total of 52 years to save the required funds,” the report notes. Similarly in Toronto, prospective buyers would need to save for 32 years to amass the required down payment.

Zoocasa’s editor-in-chief, Penelope Graham, told the Huffington Post that taking decades to save for a downpayment is “not realistic for anyone, but it’s a way to illustrate what the (affordability) gap is like. We wanted to highlight the median income―just how different market conditions can be across Canada.”

At the other end of the spectrum, the Prairies are home to many of the most affordable markets, including Regina, Saskatoon, Winnipeg and Edmonton.

canadian household affordabilitySource:

Scheer Unveils Conservatives’ Housing Platform

Thirty-year amortizations would make a comeback for first-time homebuyers should the Conservatives win a majority in next month’s election.

That was one of the promises unveiled by Conservative leader Andrew Scheer this week as one of his solutions to helping improve housing affordability.

He also announced that he would:

  • Fix the mortgage stress test to ensure that first-time homebuyers aren’t unnecessarily prevented from accessing mortgages and work with OSFI to remove the stress test from mortgage renewals
  • Launch an inquiry into money laundering in the real estate sector
  • Make surplus federal real estate available for development to increase the supply of housing.

Andrew Scheer“…we believe that for first-time homebuyers, a 30-year amortization period is appropriate,” he said during a campaign stop in Vaughan, Ont., this week. “Young first-time homebuyers often have their highest earning years ahead of them. And so, as they get promoted and as their incomes go up, they’ll be able to carry the mortgages that they’ve gotten into.”

The move would reverse moves made by previous Conservative governments, which started when Stephen Harper’s government reduced maximum amortizations from 40 to 35 years in 2008, and again to 30 years in 2011.

The late finance minister Jim Flaherty then reduced it further to 25 years in 2012 as one of multiple mortgage rule changes.

The move back to 25-year amortizations would meet one of the recommendations put forth by Mortgage Professionals Canada to improve housing affordability for first-time homebuyers.

“I am very encouraged to see the real concerns of our members, and the would-be homeowners they serve, have been addressed in such a positive manner,” MPC President Paul Taylor wrote in a message to members. “…this is a tremendous development for our sector, and we are happy that our efforts have paid off.”

Scheer also confirmed he would “fix” the mortgage stress test and eliminate it completely for mortgage renewals, something he said he would do as early as May.

CIBC Reorienting Its Mortgage Strategy

Saying his bank has “fallen short” for investors, CIBC CEO Victor Dodig announced the bank will “reorient” its mortgage strategy.

The move will see CIBC diversify its mortgage portfolio away from the two key markets it has been focused on in recent years. Nearly 45% of the bank’s mortgage portfolio came from the Greater Toronto and Vancouver areas, at $63 billion and $27 billion, respectively.

CIBC’s mortgage balances in Q3 fell to $201 billion, down from $203 billion last year.

After having made some initial adjustments to its portfolio makeup, Dodig said the bank is already “starting to see green shoots.”