-
Shopping For Mortgage
The housing industry fired back yesterday at comments from Ottawa that the sector might be overheated with a new report that shows Canadians have become conservative in their mortgage choices, leaving little chance for delinquencies.
The Canadian Association of Accredited Mortgage Professionals surveyed its members, who issued more than 40,000 mortgages totalling $10-billion during 2009, and found 86% of loans went into fixed-rate mortgages. Of those, more than 70% had fixed rates for longer than five years.
Jim Murphy, chief executive of the Toronto-based group, said the report's results show the risk in the marketplace "is clearly manageable." He left little doubt about one of the reasons his group compiled the research.
"It was done in response to some of the musings at yearend by first the Finance Minister and then governor of the Bank of Canada," Mr. Murphy said.
Mark Carney, the Bank of Canada governor, has warned about rising levels of household debt, which is reaching record levels. He has said consumers may be failing to account for higher interest rates in the foreseeable future, leaving households "increasingly vulnerable" to any economic shocks.
Shortly after Mr. Carney's remarks, Jim Flaherty, the Minister of Finance, was asked by reporters whether he was considering tightening mortgage requirements.
"If we had to we could, and it is something that we are watching and monitoring. But so far there's relative stability in the sector," Mr. Flaherty said.
The CAAMP survey addressed the overall debt concern and found "the vast majority of people who took out their first mortgage last year borrowed less than they could afford to, as their gross debt service ratios are far below allowed maximums, even at the higher interest rates that are used to qualifying them for their mortgage."
Mr. Murphy said his group's report has been forwarded to the Minister's office which continues to look at whether it should apply any brakes to the housing market. About 18 months ago, the government did limit the maximum amortization period to 35 years and demand consumers have 5% down on all government-backed loans.
more
-
Booming Housing Market
A red-hot housing market fueled by cheap money has helped Canada climb out of recession, but fears are growing that it could be a bubble much like the one that brought the United States to its knees.Household debt is climbing as buyers use record low rates to stretch for previously unaffordable homes in markets like Toronto and Vancouver, where prices hit record highs. Sales have gone through the roof and bidding wars are common.
Yet even as the central bank warns Canadians to plan for higher rates, analysts say factors including housing supply, demographics and lending practices make a US-style crash unlikely.
"I don’t think we’re in a bubble. What we’re seeing is a monetary policy that is working very efficiently," said Benjamin Tal, senior economist at Canadian Imperial Bank of Commerce.
"There is a bit of overexposure, yes ... but a more reasonable scenario is it’s a redistribution of activity -- namely, what we are doing now is stealing activity from the future," he said. "There is almost an urgency to buy a house right now."
The market’s dynamism was highlighted by a report on Tuesday that showed existing home sales jumped 73 percent in November from a year earlier, while the average price rose 19 percent nationally.
There is no doubt that housing prices in some Canadian markets are rising quickly, and that more homes have changed hands this year than even when the market was at its peak in 2007.
But many analysts are wary about calling it a bubble, which would imply that home values have increased too fast to unsustainable levels relative to incomes and other economic elements.
more
