Last Tuesday (November 21, 2023), Deputy Prime Minister and Federal Minister of Finance, Chrystia Freeland presented the 2023 Fall Economic Update and introduced the new Canadian Mortgage Charter – providing guidance for Canadian homeowners who may be struggling with their mortgage payments or upcoming renewals.

Let's take a look at these 'new' initiatives in the Charter below, 6 key items:

1. Allowing temporary extensions of amortization periods for mortgage holders at risk

• It's in a lender's best interest to help their clients maintain their payment schedules and just 'sound business'
• Lenders have a myriad of tools to help a struggling client, and is situation dependant – extending amortization periods are an option, and represents just one of the tools available to support a constructive relationship

2. Waiving fees and costs that would have otherwise been charged for relief measures

• Already exists as part of OSFI guidance a few weeks ago, and have been adopted by most (if not all) lenders

3. Not requiring insured mortgage holders to requalify under the insured minimum qualifying rate when switching lenders at renewal

• Already exists as part of OSFI guidance a few weeks ago, and have been adopted by most (if not all) lenders
• Note, insured mortgages represent a small cohort of the Canadian majority, who have uninsured mortgages

4. Contacting homeowners 4-6 months in advance of their mortgage renewal to inform them of their renewal options

• Already exists
• You automatically enter the 'renewal period' 4 months before mortgage expiry - regardless of whether a lender contacts you
• Lenders and mortgage brokers may extend their contact window to 6 months to advise on the upcoming renewal

5. Giving homeowners 'at risk' the ability to make lump sum payments to avoid negative amortization, or sell the principal resident without any prepayment penalties

• Already exists, related to #2 above

6. Not charging interest on interest, in the event that mortgage relief measures result in a temporary period of negative amortization

• If mortgage payments are missed (principal and interest), the unpaid interest gathers more interest
• A discussion with the bank will help resolve these issues through a mutual agreement, but again lender dependant
• Options have always been open to discuss with a lender

Sadly, the creation of the Charter does not bring any new relief for at-risk Canadians, BUT it does bring awareness of the challenges and possible solutions / discussions to pursue. 

Aside from political posturing, the key takeaway is to work with knowledgeable professionals and to not take everything in the news at face value!

New numbers are in just yesterday for Canada's AUGUST GDP figures - CANADA'S ECONOMY IS SHOWING CLEAR SIGNS OF SLOWING DOWN after shrinking in June. July and August proved uneventful as value of goods and services remains unchanged between both months (see article)

This early indicator for August might be a hint of what's to come when September figures are released, which means there's a chance that Canada's economy has not grown meaningfully at all – since May 2023. This result is also surprising to economists, who had expected slight growth in the economy, but is now looking at a flat to downward trend in overall GDP. 

What's even more important, is that only now, we're seeing the real impact of the aggressive rate hikes the BoC has slapped on since the Spring of 2022.

This, is probably good news for current homeowners, and prospective buyers - as a sign the BoC is done with rate hikes.. given the lag, "the recession chatter will ramp up quickly" - according to BMO Economist, Benjamin Reitzes. However, this doesn't necessarily mean the bank will start cutting rates - but with holding steady, this will lead to some stability in the housing market at least. If rates come down, asset prices will go up. 

Additional Headlines This Week:

• 'Payment shock' coming for most Canadians with mortgages, RBC says
• Airbnb, short-term rentals under scrutiny in Calgary as public opinion consulted

GOOD NEWS ON THE HORIZON! Reported yesterday, September's inflation rate in Canada SLOWED to 3.8% (from 4.0% in August) – this figure, was lower what economists were expecting, driven by broad-base decline in prices overall. Lower prices were seen through a variety of goods and services, including travel, durable goods and some grocery items. Energy prices also declined slightly relative to August, but still remains high (+7.5% year-over-year).

Source: StatsCanada

On a monthly basis, the cost of living has declined in September by 0.1% – although very marginal, it is the very first time that's happened since November last year.

This welcomed report comes at a critical time, as the Bank of Canada will announce it's rate decision next week on October 25, 2023. This is probably the BEST NEWS the BoC has received in months, and will likely take confidence with a high probability of holding rates flat at 5%.

There is further evidence consumers are also cutting back, from things like recreation to restaurants, largely due to the outrageous rate hikes over the last few years.

 A few interesting graphs below:

 Key categories saw a price decline since August. The largest buckets of Food, Furnishings, Clothing, just to name a few of the biggest movers.

 Alberta came in forth place as having the most decline in prices across Canada, while some other provinces actually saw an increase in month over month inflation rate.

This report again highlights the crucial role of increasing housing supply if the goal is to make housing affordable for everyone in Canada. It also demonstrates the importance of examining both economic and demographic variables given the recent changes that have been experienced in both”.

— Aled ab Iorwerth, Deputy Chief Economist

In our latest report, Canada’s Housing Supply Shortages, we take a closer look at the gap between supply and demand in the housing system. Our goal is to determine how much additional housing supply is needed to achieve housing affordability by 2030, beyond current trends. Meeting the demand for housing in Canada is critical and increasing supply in the rental and homeownership markets is key to achieving affordability.

This report is an update to our Supply Gaps Estimate report from June 2022.

We maintain our estimate from last year, which indicates a need for 3.5 million more units by 2030 to restore housing affordability. We also present 2 alternative scenarios for consideration: a high-population-growth scenario and a low-economic-growth scenario.

Meet Jessica Yip with MMG Mortgages here in Calgary! MMG a long-standing mortgage brokerage with decades of experience here in Calgary. Tune in to our discussion about a day in the life of a mortgage broker, and how working with a mortgage broker can help you look at various offerings from different banks to suit your unique profile and requirements! More information on MMG's website or reach out for a call, she's always down to chat about the financing environment! It's definitely a hot topic nowadays.

Website: www.mmgmortgages.ca

Instagram: www.instagram.com/jy_mortgages

The BoC HELD INTEREST RATE AT 5% TODAY, citing a weakening Canadian economy – however left the door open for further rate hikes if inflationary pressures continue to persist. 

The decision comes as good news to many, as folks were holding their breath on another hike. Last Friday, Stats Canada reported that the Canadian economy appeared to stall in Q2, as investment in housing continued to fall around the country driven by a decline in new construction projects and renovation. Stats Canada reported a CONTRACTION of the economy of 0.2%, and also revised it's forecast for Q1 2024 to 2.6% (down from 3.1% growth). (LINK)

Ironic, isn't it? The biggest hurdle of construction and renovation activity is borrowing costs. And seeing new construction slow down does not at all solve the supply / demand equation – it exacerbates the problem, particularly in Calgary...

As the rest of the country's real estate markets 'balance out', Calgary's real estate market remains resilient - almost unbelievable, of how short supplied we are right now. Two key drivers for the supply constraint: labour shortage & heightened demand for housing in Calgary.

Some anecdotal notes from CREB's monthly update for August:

1. August real estate sales surged to a record HIGH of 2,729 units transacted, largely driven by activity in the condominium sector (lower price point, higher relative inventory compared to other property types)

2. Sales-to-new listings ratio remained ELEVATED at 87% (meaning a very strong absorption rate - newly listed homes are being immediately bought up)

3. Inventory levels in August DROPPED to 3,254 units - new record low for the month of August

High Sales + Low Inventory = extremely tight market conditions and increase to prices. As a result, much of the market is seeking lower cost alternatives, putting a pressure on lower priced products, particularly in the detached home market. Across all property types, Prices have appreciated as much as 15% on average since last August.

A couple of graphics to summarize where are market is currently heading into the Fall:

As of September 5, 2023 (last 7 days):

Source: Pillar 9 MLS

Source: CREB

Things to think about if you're a BUYER in Calgary:

• Are prices really going to come down if I wait another 6 months? What is this based on, true data or feelings?
• What will happen to the resale / rental markets with new construction slowing significantly due to high borrowing costs?
• What will happen if rates stabilize? Will this lead to more or less demand for housing?
• Based on the current inventory, where will inventory be if rates stabilize and demand picks up even more?

Things to think about if you're a SELLER in Calgary:

• Will selling now or later, best position me for where I want to be in the future?
• Are you leaving a lot of money on the table if you don't sell, and the market takes an unpredictable turn?
• What can I do to make my home show the very best if I want to sell? Does that even matter right now in this market?

 The answer to most of the questions above is 'it depends'. It really depends on your current situation and where you want to be. It is evident that if the economy comes to a grinding halt, there will always be a need for housing no matter which way you look at it, the best question to ask yourself is, are you prepared?

 Give me a call if you want to chat about your situation and how we can help!

Are you thinking about moving to Alberta? Deciding to relocate is a major life choice, and finding the perfect destination that aligns with your aspirations and values is essential. Calgary, a city nestled in the heart of Alberta, offers a myriad of opportunities and a unique lifestyle that has attracted people from all walks of life. If you're contemplating a move, let's explore why Calgary might just be the perfect place for you...

Thriving Economy and Employment Opportunities

Calgary's economy has historically been closely tied to the energy sector, but in recent years, the city has diversified its economic landscape. Boasting a diverse range of industries such as technology, finance, healthcare, and creative arts, Calgary offers a robust job market for professionals seeking growth and innovation. The entrepreneurial spirit is alive and well in this city, making it an ideal destination for career-driven individuals.

Unmatched Natural Beauty

Nestled against the backdrop of the stunning Rocky Mountains, Calgary's natural beauty is awe-inspiring. With easy access to national parks like Banff and Jasper, outdoor enthusiasts will find themselves in a haven of adventure. From skiing in the winter to hiking, biking, and kayaking in the summer, Calgary provides year-round opportunities to connect with nature and explore the great outdoors. With Banff and Canmore just one hour away from the city's core, the mountains are a surreal retreat from everyday life, promoting an active lifestyle and unmatched natural beauty.

Cultural Vibrancy and Festivities

Calgary's cultural scene is vibrant and diverse, offering a rich tapestry of art galleries, theaters, music venues, and cultural festivals. The Calgary Stampede, known as "The Greatest Outdoor Show on Earth," is a world-renowned event that celebrates the city's Western heritage and is a must-attend experience for both residents and visitors. The city's commitment to the arts and culture ensures that there's always something new and exciting to explore. Calgary's Central Library, Bell Studio, and numerous theatre productions are just a few stops on the must-see list. A wide variety of music festivals also make a visit to Calgary, including Country Thunder, Calgary Folk Festival, Chasing Summer EDM Festival, in addition to regular stops by world-renown artists – there's something for everyone!

Quality of Life and Community

Calgary consistently ranks as one of the world's most livable cities, and for good reason. Its low crime rates, excellent healthcare system, and strong education options make it an appealing choice for families and individuals alike. The city's friendly and welcoming atmosphere fosters a strong sense of community, making it easy to build meaningful connections and forge lifelong friendships.

Proximity to Adventure

Living in Calgary means having access to an abundance of adventure just a stone's throw away. Whether it's embarking on a road trip to the majestic Rocky Mountains, exploring the Badlands, or enjoying the serenity of the Bow River and the rolling Foothills, opportunities for exploration and relaxation are endless.

Make the Move!

Moving to Calgary is more than just a change of location; it's an opportunity to embrace a dynamic lifestyle, abundant opportunities, and a strong sense of community. From its diverse economy to its breathtaking natural landscapes, Calgary offers the perfect blend of urban living and outdoor adventure. Whether you're seeking career growth, a higher quality of life, or the chance to surround yourself with natural beauty, Calgary welcomes you with open arms, promising a fulfilling and enriching life journey.

Make sure you reach out for more information on how to make the move as smooth and seamless as possible with a local Realtor!

Canada's annual inflation rate rose 0.6% in July (from June), kicking up the July inflation rate to 3.3% (from 2.8% in June) - more importantly, our inflation rate is now higher than the U.S. for the first time since the pre-pandemic days. Keep in mind, the Bank of Canada's inflation target is 1–3%.

Contributors to this increase were due to shelter (+0.7% Y/Y) fueled by a +2% surge in mortgage interest costs (now +30.6% Y/Y) and utilities (+2.3% Y/Y). Airfare and travel services were also strong due to the summer travel season. Gasoline prices are on track to rise over 5% in August.

Impact: This is not a good report for the Bank of Canada, while they did expect a 'back-up' in headline inflation (i.e., sticky down trend), July's result is already at the Q3 expectation, with August's readings to date expected to be even higher. The silver lining here is that CORE inflation is slowing. With the increase in unemployment and clear signs of cooler spending, some economists expect the BoC to PAUSE in September to give prior rate hikes some time to settle in - however, this month's reporting makes it a tough call. 

 (Inflation Report Here)

Canadian existing home sales were also reported to be balanced across Canada - except for the Calgary market. Sales-to-new listings ratio is running hot at 82%, and prices are now 5% higher than the early-2022 high! On the flip side, Toronto's sales-to-new listings ratio is at the lowest in all markets at 44%. Relative pricing across the country continues to point to the Calgary market as the most affordable market heading into the pandemic boom and remains cheap coming out of it.

Impact: At a feeral level, the housing market is balanced, except for our outlying market here in Calgary. The inflation backdrop continues to argue for higher rates to remain well into next year - meaningful near-term mortgage rate relief looks unlikely. The challenge of higher mortgage rates and possible increase unemployment rate will be battling against strong demographic demand for housing. However, buyers seem to be adjusting to higher rates.

 (Housing Report Here)

Source: Bank of Canada, Statistics Canada

The news is out – the Bank of Canada raised interest rates (again) by 25 bps, largely consistent with consensus estimates. Stronger than expected consumption and stubbornly tight labor markets drove inflationary pressures to remain persistent for services, leading to the expected hike. 

The BoC revised its forecast to show a slowdown in inflation to take longer than expected, now to hover around 3% for the next year, before easing to the 2% target in the middle of 2025.

BoC Policy Rate (Last 25Y)

What does this mean?

• This represents the highest Bank of Canada interest rate over the last 22 years!
• There has been a total 475 bps increase to interest rates since the March low rate of 0.25%
• Cost of mortgages will adjust accordingly, as well as all other loan products

How does this affect me?

• Individuals with large debt balances will feel the pinch, with further costs going to interest payments
• Barrier for the mortgage stress test would increase along side mortgage rates (now need to qualify at yet another higher rate)

How will this affect the housing market?

• If only we had a crystal ball... but from what we can see from the real estate side of things, those who were thinking to sell, without previously locking in an interest rate for the anticipated move, will likely avoid selling (have to now qualify at a higher rate) - further lack of inventory
• Market will likely continue as a Sellers' Market for some time, until the demand equation balances out (i.e., hike of interest rates have put off buyers enough to offset the impact of lower inventory)
• There is a potential for more properties to come onto the market, however in Calgary the outlook may an the outlier
• Particular to Calgary – economic and job growth continues to be strong, especially in Alberta, relative to the rest of Canada; belief here is that the strength of the economy is enough to handle the increase in cost of borrowing
• Those who cannot qualify to buy will have to turn to the rental market – expect a continued tight market in the rental space for some time

What can I do to protect myself?

• Watch debt balances and be aware of what interest rate you're being charged and how that has changed over time
• If you're looking to buy, best advice now is to work with a mortgage broker that is tapped into the market to provide the best opinion possible
• Challenging times ahead but hopefully rates will hold flat for sometime after this, as most economists are expecting
• Work with a realtor that is tuned-in to the market dynamics and knows how to navigate this turbulent market

Hope you found some value in this update. As always, we're here to help if you have any questions about buying / selling. You can never time the market perfectly, but it will be prudent to get as well-informed and positioned as you can to achieve your goals.