Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Canadian household debt is swelling, while gross domestic product (GDP) has been falling. The ratio reached 115% in Q2 2020, up from 101% the previous quarter. Even pre-pandemic this number was massive. Researchers have found sudden spikes in this ratio correspond to economic slowdowns a few years down the road. This is due to the pull-forward effect, new debt has on consumption.
Most Canadians that have requested mortgage payment deferrals have resumed their payments. Over 795,000 mortgages have been put on payment deferral, about 16% held by the biggest banks. As of September 30, around 297,000 mortgages, or 5.97% remain on deferral. Banks won’t see all payment deferrals end until March or April.
Canada’s largest real estate markets are seeing unemployment fall, but still in recession territory. Toronto’s rate of unemployment fell to 11.5% in October, down 1.3 points from a month before. This is still 5.8 points higher than the same month last year. In Vancouver, the rate of unemployment fell to 9.7% in October, down 1.4 points from the month before. This is still 4.7 points higher than the same month last year. Both regions are doing significantly better than peak unemployment earlier this year. However, they’re both much worse than last year.
The Bank of Canada (BoC) has ended its pandemic program to buy mortgage bonds in October. That doesn’t mean they still aren’t providing liquidity though. The balance reached $9.722 billion on Nov 11, up 1,748% from last year. This number is also $122 million higher than it was in the first reporting period after the program ended. The BoC is still buying bonds, just not on a competitive basis. It’ll still help prevent rates from rising though.
Canadian insolvencies are climbing as lockdowns ease, although they are still below last year’s levels. There were 35,535 insolvencies filed in Q3 2020, up 7.9% from the previous quarter. This is still a decline of 40% from last year. There’s a mixed read, here. On one hand, they’re down from last year. This is primarily due to the support measures and payment deferrals offered. On the other hand, insolvencies are rising on a quarter by quarter basis, even with accommodating lenders.
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