New data suggests homes sales in Toronto dropped 37% last week compared to the same time last year, according to Realosophy Realty.

The firm also says cancelled listings jumped by 27% as thousands of Canadians now find themselves out of work, putting into question the near-term future of Canada’s real estate market.

“The market has definitely hit the brakes,” John Pasalis, president of Realosophy Realty, told BNN Bloomberg. While home prices are expected to remain stable in the near-term as both buyers and sellers retreat from the market, Pasalis says the composite benchmark price is expected to fall 2.9% in the second half of this year.

“In a matter of weeks or months, surging unemployment and the market’s illiquidity will compel a growing number of tight-squeezed sellers to make price concessions.”

Realosophy’s data shows even steeper declines in certain regions, particularly where investment buying may be higher, including a 61% decline in resale home transactions in Richmond Hill, and a 46% decline in Markham.

“Canada’s housing market will slow to a crawl this spring as Canadians follow social distancing orders in order to combat the spread of COVID-19,” added RBC analyst Robert Hogue in a recent newsletter. “We think the recovery will come in stages—taking buyers up to a year to regroup and rebuild confidence amid high unemployment. Based on these assumptions, we project home resales to dive by nearly 30% this year in Canada to a 20-year low of 350,000 units.”

On the bright side, the trend could quickly reverse next year thanks to low interest rates and a bounce-back in the Canadian job market and immigration, according to Hogue, who says sales could surge by more than 40% in 2021, with many markets once again favouring sellers.

Banks Overwhelmed by Mortgage Deferral Requests

Canada’s big banks and other mortgage lenders have been inundated by requests by homeowners impacted by COVID-19 seeking mortgage assistance. More than 213,000 requests had been received as of last Thursday, according to the Canadian Bankers Association.

The big banks and other lenders announced on March 17 that they would grant mortgage deferrals of up to six months for those impacted financially by the COVID-19 pandemic. Since then, Canadians have been responding en masse wanting to either skip-a-payment on their mortgage or defer payments for several months.

“The large number of customers that have been helped continues to grow as the result of concerted efforts by front-line workers, contact-center agents and operations teams working diligently,” Mathieu Labreche, a spokesman for the Canadian Bankers Association, told BNN Bloomberg in an interview.

Scotiabank CEO Brian Porter confirmed his bank has fielded roughly 80,000 calls per day from mortgage holders exploring their options.

How do mortgage deferrals work? This is a common question as the announcement of the option has led to much confusion among borrowers. Essentially a mortgage deferral is an agreement between the borrower and the lender that mortgage payments will be suspended temporarily. But those interest payments will still have to be made at some point, not to mention additional interest on that outstanding amount. How that is done can vary by lender, but most will spread the interest on those deferred payments over future payments, “or perhaps even the life of the mortgage,” Rob Tétrault of Canaccord Genuity Wealth Management told Global News. Some may add the payments on at the back-end, he added.

Here is how Scotiabank explains the process: “During the time you defer your mortgage payments, interest will continue to accrue and will be added to your mortgage account balance at the end of the deferral period. This means your payments will be slightly higher after the deferral period ends. You will pay more in interest over the life of your mortgage, but a deferral will also help with short-term cash flow.”

Here’s a list of COVID-19 responses from most of Canada’s major lenders.

Banks Accessing the BoC’s Latest Standing Facility

Nine banks have so far accessed the Bank of Canada’s recently announced Standing Term Liquidity Facility, according to the Canadian Bankers Association.

The CBA confirmed that the Bank of Montreal, Canadian Western Bank, CIBC, Equitable Bank, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank and TD Bank Group are all accessing the facility to “demonstrate there is ample additional lending support for clients and to underscore the value of this facility for the market.”

The Bank of Canada announced the STFL on Monday to help banks “support the liquidity needs of their clients,” Governor Stephen Poloz said in a statement.

This is just the latest liquidity initiative the BoC has announced in recent weeks. Other measures announced to date by both the Bank and the federal government include:

• The launch of a $150-billion Insured Mortgage Purchase Program (IMPP).
• Relaxing of eligibility criteria for portfolio insurance to help lenders access the IMPP. This includes allowing previously uninsured mortgage loans (those with 30-year amortizations and refinances) that were funded before March 20, 2020, to be eligible for mortgage insurance and to be included in future NHA MBS issuance.
• A Canada Mortgage Bonds Buyback, in which the BoC “stands ready, as a proactive measure, to provide support to the Canada Mortgage Bond (CMB) market so that this important funding market continues to function well.”
• OSFI, the banking regulator, announced it will allow banks to issue more covered bonds (CBs), temporarily increasing the limit from 5.5% of their assets to 10%. “This temporary relief will be provided for at least a year and could be extended beyond this, if needed,” OSFI said.