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November housing market data

The Latest COVID-19 Mortgage Developments: Rates on the Rise

  • Mortgage Rates Rising Rapidly
  • Canada’s Real Estate Market Faces Uncertainty
  • Call to End to Open Houses
  • Mortgage Payment Deferral Challenges
  • Filogix’s Expert Victim of Ransomware Attack

Mortgage Rates on the Rise

2020 mortgage forecastsBanks and other mortgage lenders have been frantically raising rates since last week due to liquidity concerns and heightened credit risk. The increases continued over the weekend and are expected to persist throughout the week.

Lenders have hiked the rates they make available to brokers by upwards of 70 bps in some cases. Some of the big banks, including National Bank and RBC, have recently hiked their special rates. RBC raised all of its “special” fixed mortgage rates by 40 bps on Wednesday.

Variable rates are also on the rise as discounts from prime rate are quickly evaporating. Certain floating rates were available for as low as prime – 1.10% earlier last week, but recent increases have brought many rates back up, in some cases back up to prime (2.95%) and higher.

Canada’s Real Estate Market Faces Uncertainty

What was shaping up to be a hot spring housing market has fizzled due to concerns over the coronavirus.

Real estate markets across the country have seemingly been frozen due to concerns by both buyers and sellers over the full economic impact of the virus. Although, we won’t know for certain the full impact until the data is released about a month from now.

emergency bank of canada rate cut“We expect to see a drop in sales, but this will take a month or two to filter through into the actual results,” John Lusink, president and broker of record at Right at Home Realty, told Yahoo Finance Canada.

Others remain optimistic that the strong demand for housing seen prior to the pandemic will persist.

“So far, we have not seen anything that makes us think that we are going to have a drastic shift in activity,” Christopher Alexander, Re/Max’s regional director for Ontario and Eastern Canada, told the Globe & Mail. “There is a still a big housing shortage across the country, and interest rates are rock, rock bottom.”

In its Spring 2020 Canadian Outlook Report, the Conference Board of Canada said it expects housing to remain strong throughout the year.

Despite reporting that “the economy came to a near-halt at the end of 2019, and is set to contract in the second quarter due to the effects of the COVID-19 pandemic, the Conference Board said this about the real estate market: “Lower interest rates will throw more fuel onto the fire that is Canada’s housing market, leading to a strong increase in resale home prices and residential investment this year.”

Real Estate Associations Call for End to Open Houses

Two of the country’s major real estate associations have called for an end to open houses during the COVID-19 pandemic.

“I am calling on all Realtors to cease holding open houses during this crisis and advise their clients to cancel any that are planned,” said Sean Morrison, President of the Ontario Real Estate Association.

The Toronto Regional Real Estate Board made a similar appeal to members.

“TRREB is strongly recommending that Members stop conducting in-person open houses during the Ontario State of Emergency, and continue to offer best practices due to the uncertainty we’re faced with in dealing with COVID-19,” it said in a statement.

Just days before, two of the country’s largest brokerages, RE/MAX and Royal LePage, issued a similar call for their members to stop staging open houses.

Mortgage Payment Deferral Challenges

Banks and other lenders appeared as white knights last week when they jointly announced mortgage payment deferrals of up to six months for those financially affected by the COVID-19 pandemic.

But borrowers are reporting challenges in accessing that assistance, and new details suggest the temporary relief could prove costly for homeowners and may even end up impacting their credit scores.

“I called [my lender] for my mortgage deferral and also wrote an email and this was 2 days ago with no reply,” one CMT reader commented.

Others have reported waiting on hold for hours and receiving conflicting information once they finally do get through.

In a Twitter post, Ron Butler of Butler Mortgage Inc. wrote that from his anecdotal experience so far, he’s found there to be “zero” consistency when borrowers call up their lenders.

“You can get a different answer from different people in the same bank’s call centre, same day,” he tweeted, adding that this isn’t unexpected given the nature of this “rapidly emerging situation.”

And while some borrowers may have expected a “mortgage payment holiday” for up to six months, the reality is that interest will continue to be accrued on the mortgage, which will then be added back on to the principal.

“Technically, clients would then be [charged] interest on top of interest for those payments [that were] deferred,” an RBC call centre source told CBC News.

“In effect, it’s as though the bank is loaning you the amount that you would have paid in interest during the deferral period and then charging you interest on that loan as well,” the story noted.

Filogix’s Expert Victim of Ransomware Attack

On Friday, Canada’s main broker system suffered what the company says it believes to be a ransomware attack, and was voluntarily shut down and remained unavailable as of Monday morning.

“We would like to reassure our stakeholders that, to the best of our knowledge, we do not believe that any customer or employee data was accessed or exfiltrated, nor do we believe our clients’ networks were impacted,” Filogix said in a statement on its website.

“We will bring the affected servers back online in a controlled manner when we are completely confident it is safe to do so.”