Economy Snapshot

Economy Snapshot by Rebecca Awram – March, 2021

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RATES
This week I had a realtor ask me if I would work with her clients, they were eager to meet me, as long as I could match the “xxx%” that their Bank was offering them.  Obviously if they were happy with their bank, the service, the strategy, the communication, the turnaround times and the knowledge of their rep, they wouldn’t be looking to have someone else match the rate.  My response to the realtor might seem harsh, but it’s accurate:  “I’m sorry, I just don’t take on clients that are chasing rate.  It’s a waste of time, and if I win a client on rate I will just as quickly lose a client on rate.  Most lenders end up in about the same place on rate over time anyway, or to lose out on 5 bps affects their payment by eleven dollars per month on a mortgage this size.  Focussing on rate is a distraction, the real value is in finding the best mortgage terms, that’s where lenders really vary a lot.  I am a strategist and an educator.”
 
Things I will chase:
– the best mortgage
– the best policies
– the best penalty calculation
– the best porting policy
– lenders with the best customer service and exit policies
– finding a client the most money
– using lenders that can get us 1-2 day approvals, or in some cases even firm approvals before the client writes an offer, allowing us to go in subject free
 
What I won’t chase:
– rates
– clients
 
Now, all of that said, it actually IS a good time to lock in a rate somewhere, if you or your client like the fixed rate option. Fixed rates are driven by yields in the Bond Market, and while central banks are holding the overnight rate at record lows (which drives Prime rate and variable rate loans), the bond yields have been rising since early this month and that is putting upwards pressure on fixed rates.  The 5 yr Government of Canada bond, upon which mortgage rates are generally tethered, are currently the highest they’ve been since March 2020.
 
CANADIAN ECONOMY
Inflation concerns are mounting.  In a rare move this week, Statistics Canada revised-up it’s estimate of core inflation from just a week ago, at a time when investors are becoming more worried about global price pressures.  This has rattled markets a bit, and while inflation is expected to accelerate in the coming months, the government has announced that they see little immediate threat from rising prices, even with extraordinary levels of stimulus coursing through the economy.  They predict that inflation will not sustainably return to its 2% target until 2023, despite intermittent surges. We still have unemployment rising, a lockdown continuing in some areas and we are 43rd in the world for vaccine dose rollout.   Our slow start on that front will ensure a longer period of economic under-performance.  The Canadian dollar is creeping up against the US.
 
Although the economic outlook is bumpy in the short term, it improves significantly for the second half of the year.  Employment is expected to rebound as provinces lift restrictions and vaccinations plans get underway.
 
US AND GLOBAL ECONOMY
There’s been some very volatile swings in trading this week, but we seem to be back in positive territory with north american stocks setting new all-time highs in February.  Bond yields are taking off in the US also, even though their government has committed to keeping easy-money policies unchanged.  This is putting upwards pressure on their mortgage rates too.  It’s a strong week for the price of oil, and gold is taking a step back.  The US dollar is slipping again.

RATES
This week I had a realtor ask me if I would work with her clients, they were eager to meet me, as long as I could match the “xxx%” that their Bank was offering them.  Obviously if they were happy with their bank, the service, the strategy, the communication, the turnaround times and the knowledge of their rep, they wouldn’t be looking to have someone else match the rate.  My response to the realtor might seem harsh, but it’s accurate:  “I’m sorry, I just don’t take on clients that are chasing rate.  It’s a waste of time, and if I win a client on rate I will just as quickly lose a client on rate.  Most lenders end up in about the same place on rate over time anyway, or to lose out on 5 bps affects their payment by eleven dollars per month on a mortgage this size.  Focussing on rate is a distraction, the real value is in finding the best mortgage terms, that’s where lenders really vary a lot.  I am a strategist and an educator.”
 
Things I will chase:
– the best mortgage
– the best policies
– the best penalty calculation
– the best porting policy
– lenders with the best customer service and exit policies
– finding a client the most money
– using lenders that can get us 1-2 day approvals, or in some cases even firm approvals before the client writes an offer, allowing us to go in subject free
 
What I won’t chase:
– rates
– clients
 
Now, all of that said, it actually IS a good time to lock in a rate somewhere, if you or your client like the fixed rate option. Fixed rates are driven by yields in the Bond Market, and while central banks are holding the overnight rate at record lows (which drives Prime rate and variable rate loans), the bond yields have been rising since early this month and that is putting upwards pressure on fixed rates.  The 5 yr Government of Canada bond, upon which mortgage rates are generally tethered, are currently the highest they’ve been since March 2020.
 
CANADIAN ECONOMY
Inflation concerns are mounting.  In a rare move this week, Statistics Canada revised-up it’s estimate of core inflation from just a week ago, at a time when investors are becoming more worried about global price pressures.  This has rattled markets a bit, and while inflation is expected to accelerate in the coming months, the government has announced that they see little immediate threat from rising prices, even with extraordinary levels of stimulus coursing through the economy.  They predict that inflation will not sustainably return to its 2% target until 2023, despite intermittent surges. We still have unemployment rising, a lockdown continuing in some areas and we are 43rd in the world for vaccine dose rollout.   Our slow start on that front will ensure a longer period of economic under-performance.  The Canadian dollar is creeping up against the US.
 
Although the economic outlook is bumpy in the short term, it improves significantly for the second half of the year.  Employment is expected to rebound as provinces lift restrictions and vaccinations plans get underway.
 
US AND GLOBAL ECONOMY
There’s been some very volatile swings in trading this week, but we seem to be back in positive territory with north american stocks setting new all-time highs in February.  Bond yields are taking off in the US also, even though their government has committed to keeping easy-money policies unchanged.  This is putting upwards pressure on their mortgage rates too.  It’s a strong week for the price of oil, and gold is taking a step back.  The US dollar is slipping again

 

Economy Snapshot

Economy Snapshot by Rebecca Awram – February, 2021

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Economy Snapshot by Rebecca Awram

 

RATES
Rates continue to stay low, with the sharpest of them going to high ratio insured purchases. Most lenders end up in pretty much the same place over time.  For the same mortgage of course (you can’t compare an insured high ratio purchase to a conventional 30 year refinance).  They just don’t all move on the same day.  Chasing a rate is usually a waste of your time.  Seek a solid mortgage from an awesome lender, with great terms, and you’ll never go wrong.  Or, as I like to say to my clients, “Do you want the lowest rate or do you want to pay the least amount of interest?”
 
CANADIAN ECONOMY
One of my favourite economists that I’ve been following for a long time, Benjamin Tal of CIBC, has commented this week that a post-pandemic population boom will inflame demand for rental units and long term housing.  The current weakness in rentals he views as healthy, because the speculation that drove the feverish growth has dissipated. The significant driver of demand is going to be Canadians returning from the US and Hong Kong, and increased immigration targets.
 
He also comments on the move-up and move-over buyers that we’re currently watching accelerate the housing market.  He feels that the trend has been around for awhile, and while the pandemic has expedited it, he does not think it will last.  He feels that a huge amount of labour will go back to the office.  Not sure I agree, but this guy is rarely wrong, so I’m giving it credence. 
 
A surprising side effect of the pandemic is the largest cash hoard in history.  Given the poor track record of Canadian households when it comes to over-borrowing and under-saving, this wasn’t what anyone predicted or expected when covid struck.  Yet our household savings rate has hit an all-time high, and by a huge margin, as the savings bubble is staggering in size.  It will likely rise to $200 billion when the final quarter is tallied.  Curbing spending is good for savings accounts, but not so good for the broader economy that relies on consumers to open their wallets.  So it’s a mixed blessing.
 
US AND GLOBAL ECONOMY
Markets are up around the globe, but have started to calm down.  There is a pervasive undercurrent of fear despite the markets’ near all-time highs.  The covid peak appears to have passed.  Crude prices have trended up on an impressive run, as crude inventories in the US are now below their five year average and nationwide inventories continue to slump.  Chinese demand is up also, so thesee are good signs from the world’s two largest energy markets.  Gold pricing is little changed, but a big rally this week in the spot price of silver.  Tech stocks leading the way in the market.  
 
Like Canada, US personal savings are at a record high, more than double its average since 2000.  The US economy already looks to be improving following the large aid package and virus rates are starting to tick down.  China is stockpiling chips and chip-making machines to protect itself from a widening US technology ban.
 
RECENTLY FUNDED CHIP FULLY OPEN MORTGAGE
– mid 70s couple with a $1.3M home
– found ideal downsize home for $600K and needed to act asap
– CHIP Open over both properties to get them the $600k they needed without a subject-to-sale
– Purchase easily completed with no stress of monthly payments
– they transition to the new home, get the previous home ready to list, and sell on their own terms
 
The clients were able to write on their purchase with no subject to sale clause and have the winning offer!  And best of all, they were able to move at their own pace, not pay for storage, and list an empty home that their realtor staged beautifully, probably increasing their sales value also.

 

Economy Snapshot

Economy Snapshot by Rebecca Awram – January, 2021

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Economy Snapshot by Rebecca Awram

 

RATES

Rates continue to stay low, with the sharpest of them going to high ratio insured purchases. Most lenders end up in pretty much the same place over time. For the same mortgage of course (you can’t compare an insured high ratio purchase to a conventional 30 year refinance). They just don’t all move on the same day. Chasing a rate is usually a waste of your time. Seek a solid mortgage from an awesome lender, with great terms, and you’ll never go wrong. Or, as I like to say to my clients, “Do you want the lowest rate or do you want to pay the least amount of interest?”

 

There has also been some speculation recently about a possible reduction to the overnight rate of 10-15 basis points, also referred to as a ‘micro cut’ by the Bank of Canada. The overnight rate is what drives the Prime rate, which is what drives the float on variable rate loans/mortgages and lines of credit. It will depend on how things go, economically, as we head into 2021.

 

The lowest mortgage rates in Canada are made possible through securitization. This is when the lender sells pools of insured mortgages to investors. This is why we see high ratio insured mortgages having access to the lowest mortgage rates. CMHC wants to make this more expensive for lenders, which will mean increasing pressure on fixed rates for many borrowers. Effective January 1st 2021 CMHC is making lenders pay 20 bps more in securitization ‘guarantee fees’ on five year mortgages and some others.

 

I WAS INTERVIEWED!
There’s something about being interviewed, regardless of how typical the content or mundane one’s story, that is exciting and makes you feel special 🙂
Mortgage Broker News

 

CANADIAN ECONOMY
Economists believe that the upcoming jobs report will show employment increasing, due to elevated restrictions in some of the country’s largest cities. A second wave and a slow vaccine rollout mean that expectations are not high for a rapid improvement in the short term.

 

US AND GLOBAL ECONOMY

Looking past the pandemic and suffering of so many small businesses, the market actually had a great year in 2020. The S&P rose 16% and the NASDAQ a whopping 44%. Gold up 24% and silver 47%, these two metals having their best year since 2010. Rationale for the quick recovery in the market while a pandemic continues to rage on, is the flood of stimulus and record low bond yields. The US dollar starts off the year trending lower.

 

The NYSE said it will no longer delist China’s three biggest state owned telecommunications companies, backtracking on a plan that had threatened to escalate tensions between the world’s largest economies. Not sure of the reason for the U turn, but it appears to defy the executive order from President Donald Trump. US officials are reportedly considering prohibiting Americans from investing in Alibaba Group Holdings, a potential escalation of the outgoing Trump administration’s efforts to unwind US investors in major Chinese companies.

 

The first few days of trading post Brexit saw no major glitches.

 

Subdued reaction from the markets yesterday during the violent riots in Washington that led to four deaths. The Dow even made a new high. Optimism reigns supreme even when Twitter, Facebook and Snap took the unprecedented step of suspending Trump’s accounts. Stocks are climbing as investors focus on the prospect for more economic stimulus and the likelihood that calm will prevail.

 

Want a 20 year mortgage at 0%? Move to Denmark

 

Economy Snapshot

Economy Snapshot by Rebecca Awram

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Economy Snapshot by Rebecca Awram

 

RATES

Rates continue to stay low, and the HSBC .99% made headlines across the country this week.  Keep in mind it is for high ratio insured purchases only, and their current turnaround-times on an application are 3-5 weeks depending on location.  So if your client plans to access this rate, be sure to write lots of time in that Contract for your financing subject 🙂

 

The attention-grabbing rate though should benefit all borrowers, and other lenders will be forced to sharpen their pencil. Probably not matching it, but certainly tightening up the spread.  We should see more rate-drops from most lenders next week and following.

 

That’s the thing about rates…. most lenders end up in pretty much the same place over time.  For the same mortgage of course (you can’t compare and insured high ratio purchase to a conventional 30 year refinance).  They just don’t all move on the same day.  Chasing a rate is usually a waste of your time.  Seek a solid mortgage with great terms, and you’ll never go wrong.

 

I WAS INTERVIEWED!
There’s something about being interviewed, regardless of how typical the content or mundane one’s story, that is exciting and makes you feel special 🙂
Mortgage Broker News

 

CANADIAN ECONOMY
Mortgage deferrals are dwindling, and filings show that the vast majority of borrowers have now resumed regular payments.  Mortgage payment deferral programs played an important role in helping households manage pandemic-related disruptions to incomes.

 

The Canadian dollar has also risen to a two-year high of over 78 cents US, which is in large measure a reflection of broadly based US dollar weakness.

 

The Bank of Canada came and went yesterday with the expected lack of change in headline policy.  The accompanying verbiage would indicate that we are never seeing raising rates ever again 🙂 Market reaction was nil following the release.  While the virus and economic headwinds are worsening, financial markets are functioning well and the Bank of Canada can remain confident the medium-term outlook is intact.  According to Bloomberg News, Canada has reserved more vaccine doses per person than anywhere else.

 

US AND GLOBAL ECONOMY

The market has still been on fire, largely based on optimism of anticipated vaccine rollouts. The S&P keeps hitting new all-time highs. It still seems strange to be in constant record territory, despite the continuing awful conditions of the economy and society. But investors will lose some steam as Democrats and Republicans are unable to resolve divisions over coronavirus stimulus.  Also, the vaccination rate would need to be upwards of 68% to provide widespread coverage and prevent future outbreaks.  This would be a logistical challenge, but possibly even harder to convince 68% of the population to get a jab in the arm.

 

HELMUT PASTRICK, CHIEF ECONOMIST, Central 1 Credit Union

This was a great webinar I attended this week, his final speech of a 44-year career in economics.  I took a lot of notes, and these are some of my observations of his statements and predictions.

 

We’ve had a very sudden/sharp yet short recession, with a K shaped recovery: most of the economic recovery is pronounced and well underway, but a segment of the market is still trending downwards.  The pandemic has had very uneven impacts, with high contact services and lower wage workers the most adversely affected.

 

He feels the federal policy response has been appropriate and that we did all the right things.  Most importantly, it was big and it was immediate.  While this will drive a large federal deficit, he feels it’s sustainable, as rates are so low and our federal bonds are rated Triple A.

 

Canadians are sitting on record-breaking savings. Estimates range from $80B to $120B. This is largely due to a huge drop in consumption, and once again, it is the middle-to-upper wage earners that can enjoy this luxury. And this is happening everywhere, not just Canada. Once we hit our acceleration in 2021 – 2022 we can expect to see a lot of pent-up demand in the economy that will materialize, and Canadians are largely well capitalized to fund it.

 

Population growth is currently about zero, but this is due to the pandemic and limits on international mobility.  The Federal Government has increased immigrations targets to more than 400K, but that won’t be realized until well into 2021.  But this frenzy of backlog, when it occurs, will be a huge stimulator for economic growth in 2021 and 2022.

 

Housing:  we all know there is a huge disconnect between inventory and pricing right now, and while there has been some upwards pressure on single-family homes, the relatively flat pricing numbers that we’re seeing here have Helmut a bit stumped too.

 

Given the low inventory, he would expect to see higher HPI across all asset classes and feels that there will be a lot of catch-up happening in 2021 and 2022.    He predicts price-pressures will present soon and is frankly surprised that they haven’t sooner.

 

But what of the disconnect between condo and sfh action?  The simple explanation that buyers want bigger/better/larger homes is just one piece of the puzzle.  Think back to the K shaped recovery…. it is only one segment of the population that is strongly recovered, and those will tend to be homeowners already.

 

So we’re seeing existing homeowners driving a lot of the churn in the market.  First time buyers, which usually DRIVE the market, are on the soft side.  So the lower price-point condos and townhomes are under-represented in the overall action.

This will change and the economic recovery changes the demographics that are recovering.  Also driving this disconnect is that the rental/investor component is weaker, given the overall higher vacancy rates and the slowing of rental increases.

 

Vacancy rates are still historically low, but this is the first time we’ve seen them increase marginally in a very long time….. so a lot of investors are sitting back.  This could mean condos are actually an opportunity right now, as pricing is flat, yet all the indicators for a surge in 2021 and 2022 are evident (inventory, economic recovery, rental recovery, and the immigration targets).

Congratulations to the Grand Prize Winner!!!

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Congratulations to the Grand Prize Winner!!!

Leonela Argenal
Victory Real Estate Group
https://homesbyleonela.ca/

As the year has shifted dramatically, we weren’t sure when she would be able to enjoy a Vegas package, so she opted to take a generic travel gift card instead, to use at a future date to the country of her choice 🙂

Stay tuned for new referral contest details to be announced later this month!!!