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Canadian housing affordability report Q2 2021

Latest in Mortgage News: Housing Affordability Back on the Decline

Following improvements in 2020, housing affordability worsened in the second quarter of this year by its widest margin in 27 years.

The main culprit was rising home prices, according to National Bank of Canada’s latest Housing Affordability report.

“Income growth and lower interest rates were conducive to improving affordability for most of the past two years,” the authors wrote. “That is no longer the case in 2021, as income growth is being easily outpaced by home price increases, while mortgage interest rates also rose on a quarterly basis.”

The report noted that the median home price rose $38,000 in the quarter and $89,000 from a year ago, which also “increased the burden” of accumulating the minimum down payment.

On average, buyers in the country’s 10 largest urban markets would need just shy of six years to save up the minimum down payment for their purchase (all home types). That’s a full year more of savings needed compared to this time last year.

In the largest markets, that timeframe is even more extreme. For non-condo properties, it would take the average Toronto homebuyer 26.5 years to save up a minimum down payment and 34 years for a buyer in Vancouver.

Homeowners in those cities are also using a larger percentage of their income to service their mortgage: 65.6% for non-condo owners in Toronto (up 5.4% from Q1), and 84.7% of a Vancouver borrower’s income (up 6.3% from last quarter).

“True, the latest reports on housing market activity hint that we may be turning a point: Home sales have slowed, and prices appear to be decelerating in certain markets,” the report noted, adding that interest rates have edged down in recent weeks. “Nonetheless, resale market indicators such as the active-listings-to-sales ratio still indicate a market favourable to home price appreciation.”

Home Insurance Quotes Now Available Through Filogix

Mortgage brokers using Filogix Expert, one of the industry’s key deal origination systems, will now be able to request home insurance quotes as an added benefit for their clients.

The new feature comes as a result of Finastra’s recent partnership with Surex, an online insurance marketplace.

“The integration of Surex with Filogix Expert will allow mortgage brokers to easily request home insurance quotes for customers with a simple click of a button, the companies announced in a release. “Brokers will receive access to 10+ offers from Canada’s leading insurance carriers, all within the Filogix Expert platform.”

“Filogix is committed to streamlining the mortgage process, from origination through to underwriting,” said Jerry Lo, Vice President, Filogix. “Through our partnership with Surex, we are removing another barrier from the process. Brokers will be able to access and provide their customers with home insurance quotes, providing a better experience and greater value for all involved.”

Credit Market Health Suffered During Pandemic

A new tool developed by credit ratings agency TransUnion found the pandemic had a “pronounced” impact on consumer credit health.

TransUnion’s Credit Industry Indicator (CII) found a “significant impact on credit market health beginning at the onset of the pandemic and continuing through April 2021. This was driven largely by a decrease in both the demand and supply of credit as the impact of pandemic lockdowns took effect.”

In April of 2021, however, conditions had started to improve with a sharp 80% increase in inquiries and a 33% rise in originations. That pushed the CII up two points from its low recorded in August 2020.

In addition, “the savings rates of Canadian consumers are at historical highs, household debt is down, and the improvement in delinquency and increased liquidity is expected to continue to impact credit demand and performance,” TransUnion’s report noted.

But Matt Fabian, TransUnion’s director of financial services research and consulting, cautioned that it’s important to consider all metrics of credit health.

“Just because one metric has improved, it doesn’t mean overall credit health of the market has also improved,” he said in a statement. “Our indicator shows the importance of considering a comprehensive range of measures that drive credit market health. The latest CII clearly indicates that there are still uncertainties ahead on the road to recovery.”