Canadians still aren’t returning to the real estate market, and it’s hitting mortgages. Canadian Bankers Association (CBA) numbers show November had fewer mortgages than the year before. The decline represents the fourth month the market has seen negative prints. Prior to this, the number of mortgages hadn’t dropped on an annual basis in over 29 years.
Canadian Mortgages Held At Banks
The number of mortgages held at large Canadian banks.
Source: CBA, Better Dwelling.
Canadian Mortgages Print First Annual Drop For November
The number of mortgages held by Canada’s largest banks continued to shrink from last year. Banks held 4,759,706 mortgages in November 2018, down 0.18% from the year before. Month-over-month growth was the second smallest in quantity for November, second only to 2017. This is the first annual decline since at least 1990.
Canadian Mortgages Held At Banks (Change)
The annual percent change of Canadian mortgages held at large banks, compared to one year before.
Source: CBA, Better Dwelling.
Ontario Mortgages Print Slowest Annual Growth On Record
Ontario mortgages recovered from last month’s negative growth, but not by much. Ontario represented 2,008,229 of the mortgages in November 2018, up 0.03% from the year before. This was the smallest increase for November in Ontario, going back to at least 1990.
Ontario Mortgages Held At Banks (Change)
The annual percent change of Ontario mortgages held at large banks, compared to one year before.
Source: CBA, Better Dwelling.
BC Mortgages See Small Growth, But Only 2016 Was Smaller
On a semi-positive note, BC’s mortgage numbers were almost flat – and they’ve seen worse. BC represented 644,094 of the mortgage in November 2018, up 0.02% from the year before. In case you’re wondering, it works out to 154 mortgages than the same month last year. It’s the second smallest annual increase for November since 1990, with only 2016’s negative number making a worse print.
British Columbia Mortgages Held At Banks (Change)
The annual percent change of BC mortgages held at large banks, compared to one year before.
Source: CBA, Better Dwelling.
Canada is currently seeing something it never has before – shrinking mortgage growth. The mortgage size is rising, but the actual number is falling below replenishment. With booming immigration and record sales over the past few years, it’s actually a strange trend.
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Doesn’t this infer that with rising population growth, mortgage growth is being satisfied outside of the big banks?
Or, it could infer less mortgage initiations, period.
and there’s that. Sales are dropping to levels we haven’t seen in a while, across the country. Mortgage growth at all OSFI regulated banks and credit unions are pretty abysmal.
Depends on your perspective, but it’s not good any way.
The growth is going to private lenders, which means the impact of low rates is null with these borrowers. They’re pulling away more disposable to service similar types of income debts that would have been fulfilled at a bank just last year.
It infers you ran out of qualified borrowers willing to borrow money to buy houses at the current prices. Now the question is how many of these mortgages are held by people that can weather a recession.
You can’t taper a ponzi scheme
Good data point as always, but I think this read requires more context than BD articles normally require (not necessarily a bad thing, but non-technical readers might need a breakdown).
These are the largest banks in the country, losing market share. Theoretically this is being picked up by smaller lenders – non-bank (or monoline) and private lenders mostly. All of this accounts for less than 20% of the market, but each one of these segments mean a different thing.
Non-Bank and Monoline would be good, because they generally have lower rates. These would show up in the total institutional lenders balance, and it’s not. This means they’re experiencing very small growth, and actually experienced an abrupt decline this Winter for some reason. Still unclear why February was such a small month.
Private lenders would be bad, because borrowers are paying higher rates than the appreciation of the house. Even if homes make gains while they’re at a private lender, they’re losing money, and most likely will want to sell after a while. In behavioral finance, people often take a loss and rationalize it by saying they don’t lose until they sell. See: @BagHolderQuotes on Twitter.
Even worse, since private lenders charge higher rates, the pressure on household incomes is even higher than normal. This reduces spending, which has a multiplying effect when dragging down the income.
Tonnes of Mortgage Renewals and New Mortgages just going to Private Lenders. Private Lenders growth of the Mortgage market seems to have increased from approx. 6% in 2017 to around 12 to 15% in early 2019. I’m sure 90 % of us can agree this is why the # of mortgages are falling at the 6 big banks. I seriously doubt people are paying off there mortgages faster then new buyers have been coming to the market.
How similar is Canada’s current Housing market to the 2004 to 2008 period that the US experienced? based on the facts from Wikipedia it looks like Canada is currently similar to the late 2006 maybe early 2007 since prices have peaked in most of the country but are staying flat or still hanging on, while the private lending is still surging.
From Wikipedia on US Subprime Mortgage Crisis:
“In the US, the percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to approximately 20% from 2004 to 2006 with much higher ratios in some parts of the U.S. A high percentage of these subprime mortgages, over 90% in 2006 for example, were adjustable-rate mortgages.[4] Housing speculation also increased, with the share of mortgage originations to investors (i.e. those owning homes other than primary residences) rising significantly from around 20% in 2000 to around 35% in 2006–2007. Investors, even those with prime credit ratings, were much more likely to default than non-investors when prices fell.[8][9][10] These changes were part of a broader trend of lowered lending standards and higher-risk mortgage products,[4][11] which contributed to U.S. households becoming increasingly indebted. When U.S. home prices declined steeply after peaking in mid-2006, it became more difficult for borrowers to refinance their loans. ”
Only way to save Canadian Housing is by lowering interest rates back down to 0.5% so that the housing bubble can continue, the Canadian $ will drop down to 65 to 68 cents or worse and inflation from import costs will sky rocket. Skyrocketing inflation will eventually force the Bank of Canada to raise rates again and then the bubble will completely pop if it hadn’t previously.
IFrom above:
Only way to save Canadian Housing is by lowering interest rates back down to 0.5% so that the housing bubble can continue, the Canadian $ will drop down to 65 to 68 cents or worse and inflation from import costs will sky rocket. Skyrocketing inflation will eventually force the Bank of Canada to raise rates again and then the bubble will completely pop if it hadn’t previously.
It also how I see the future for Canada. The only period when Canadian $ was equal to US dollar was around 2000. It was the period when Canada was selling a lot of tar sand oil to US. Housing is only a band aid on a fail economy policy. Either Canada sell something on the International market same as 2000 or it will eventually face currency devaluation. This is one of the reason of low Canada dollars, real estate is not a way to fix a weak economy.
It was par about five years ago
They would be foolish to cut rates now it will collapse the currency, and it did not help australia prop up their housing market in the slightest.
Now the aussies have both a collapsing housing and currency at the same time.
When people are in peak debt lower rates wont encourage them to borrow more.
What did they expect?
The largest banks are letting market share escape their grasp by choice..Because they are deeply concerned about the true quality of Canadian borrowers. Daddy’s HELOC being used to get their son johnny into an over valued home and high mortgage. Lets face it the house allway’s wins and the banks have all the stats that guide their choices. It’s a house of cards, hollow and just about ready to collapse. If you see a sign the private lenders I call sub prime start drying up or clue in the titanic is sinking and now leaning over to one side, we are in for BIG trouble.
I was at my car dealer yesterday evening, I’ve seen funerals that are more upbeat. All the staff I knew are gone. I had a three hour warranty service call, did not see a single potential buyer drop in. Not one. Sales staff were dozing off by 7pm. I don’t blame them, nothing to do….I know weekends are much busier, but what a change in 18 months. Place used to be a hive of activity on week nights.
Something occurred to me while reading this article and all the comments. If there is a lot of international investment money coming in and buying houses, it’s highly likely money that pays off a house in one shot. No need to mortgage. Therefore, the banks miss out on mortgages.
IF the above is true and at the current moment (meaning the last 5-6 years) there’s been an increase in international money, the banks would have been hit two-fold: 1) losing out on mortgage interest because the international buyers don’t need a mortgage and, 2) losing out on the non-international buyers who would otherwise have bought those same houses and would have taken out a mortgage, thereby providing banks with interest.
The scary part? As DB pointed out. What if the banks already know something bad’s about to happen and have purposely started culling the number of mortgages they want to carry?
If you are borrowing from one of the big 6 banks, chances are you are not getting the best rate. When I was looking for a mortgage, the rate offers given by big banks weren’t even close to what I was offered at smaller lenders like Meridian/ICICI Bank/MCAP/etc.
Sales activity has definitely declined and many are moving to private lenders to fund their mortgage which is a bad thing but unless a big recession hits, I doubt housing in Toronto will drop more than 10-20%.
we will see ……… not sure why people think the most indebted country in all of the G7 can’t have a housing decline of 20%. strange thinking well, if they got skin in the game (most readers do) I understand the fear.
See if you guys can figure this out : Its ok for home prices to triple or for some quadruple over a decade, but no one can see prices declining by 20%. Canada hasn’t stop climbing in 29 years will it go forever? like people said about Vancouver last year ?
bought for 220k in 2008 ,
valued at 780k in 2018,
why would it be impossible for my home to go down to 625 or lower by 2020 ? let me guess – rich immigrants ? where is this confidence coming from? is that what the agent said?
“We have reached a permanantly high plateau”
– said moments before 1929 crash and depression
Immigration aside, there is a strong job market in Toronto and the demand for houses less than/around 1m (forgot to mentioned this price range in my initial comment; luxury homes can/have/will drop more than 20%) is still there. Prices are also sticky in real estate. You won’t want to sell your house for less than what a comparable house sold recently unless you absolutely have to (recession).
Confidence comes from the strong fundamentals in Toronto (jobs/amenities/diversity/etc). Immigration do play a part but it’s not everything…and if you are listening to your agent or anyone with a bias interest in real estate then you probably should stop and think instead.
Joe. You’re one of these strong fundamentals !!!Toronto !!!everybody makes $300,000 a year and can afford a million-dollar home guys.
Read this please…
https://www.huffingtonpost.ca/2018/10/05/best-job-markets-canada_a_23552269/
“Job Markets In Canada’s Largest Cities Are Losing Steam. Here’s Where Else To Find Work”
Why does Toronto families have the lowest incomes as per stats Canada?
Cto. You are one of those weak fundamentals!!! Toronto gonna crash!!! I can finally buy a house!!! Everyone gonna lose their jobs and have to sell their million-dollar house at half price guys.
This is a bear site and not gonna try convincing people otherwise…
Why Toronto families have the lowest incomes?
1) Lots of service jobs in Toronto with unreported incomes
2) Immigrants sending their kids here to study and then they get PR. Dad/mom doesn’t work or work jobs that have very low income while their kid takes good jobs after college. A family unit like this will report very low income compared to their actual wealth/assets.
3) Lots of entry level jobs in Toronto
etc…
Kinda of off topic. But, the data on Zolo looks real bad for Vancouver sales compared to active listings. I am seeing detached active listings of 1449 and 61 sales from March 28 to April 25th. I know this is not a full month but the rough calculation is a sales to listings ratio of 4.2%. Please tell me this is not right….
https://www.zolo.ca/vancouver-real-estate/trends
Well the months of inventory last time I saw was at around 8. Definitely something there.
Joe
Ok Joe. 3 reasons suggesting 50 to $80,000 a year jobs. Just like every other big city in North America.
This in no way justifies $600,000 condos and 1.5 million dollar houses.
Simple math $60,000 a year job cannot afford a $600,000 condo or pay the rent that they’re asking at 2 to $3,000 a month.
Toronto is no different than any other big city in North America or the world just like in 1990 it’s still subjective to Major price declines. Especially when prices and rents get out of sync with the fundamentals which is exactly now.