Published: March 23, 2020 • Last updated: June 23, 2020 at 16:51 pm
Running Commentary and News Updates On COVID-19’s Impact on Banking, Real Estate, Mortgages, Government Relief Programs, Personal Credit, and Other Financial Health Matters
Saturday, May 23 Update
CMHC Head Warns Us All These Debt Deferrals May Bite This Fall
Patrick Brethour of The Globe and Mail yesterday reported on Evan Siddall’s negative commentary to a parliamentary committee earlier this week. He wrote:
*CMHC is warning of a “debt deferral cliff” this fall, as unemployed Canadians are forced to make up for mortgage payments that were frozen during the economic lockdown. Mr. Stephen Brown, senior Canada economist at Capital Economics, said he believes those concerns are overstated. Many consumers will have been able to set aside some funds in the intervening months, reducing the number of defaults and the downward pressure on consumer spending. “It’s more of a downward slope, not a cliff,” he said.*
Thursday, May 21 Update
Drop Off In Rental Income Will Hurt Home Prices
The Financial Post reports how loss of rents are going to spill over into a reduction of home price to help make them viable. The article states “One thing that is certain is that fewer people are coming into the cities. Immigration has all but stopped and the halt in tourism has landlords of short-term rentals switching to the long-term rental market instead.”
Wednesday, May 20 Update
CMHC Concerned House Prices Will Fall 9% to 18% Over Next Twelve Months
Evan Siddall, the CEO of CMHC (Canada Mortgage and Housing Corporation) addressed a parliamentary committee on Tuesday, May 19 and talked about the potential for falling home prices over the next year or so. He is concerned that the government may have to step in and make good on insurance claims if some properties go “under water” (when the mortgage is greater than the value of the home) He said it is possible home prices could decline 9% to 18% over the next twelve months.
He also speculated it might make sense to increase the minimum down payment on a home purchase to 10% – thus insulating first time buyers to an extent from being wiped out as soon as they complete their first home purchase.
Mr. Siddall said ““Moreover, CMHC is now forecasting a decline in average house prices of 9 – 18 per cent in the coming 12 months. The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada’s longer-term financial stability.”
Bloomberg reports here.
Friday, May 15 Update
Zoocasa reporting the the median price of condos in the City of Toronto has already fallen $65,000 since February, 2020. I expect this downward trend to continue. Click here for the full article.
Toronto Storeys reports National Home Sales overall declined 56.8% from March to April, 2020
Thursday, May 14 Updates
Jim Reid, global head of credit strategy and thematic research at Deutsche Bank.
“So while societies will eventually heal and economies will recover, the world will be a different place to the one we knew last year. Much change to our personal, business, social, and economic lives awaits.”
This and much more in these National Post Articles :
When You Need To Negotiate Your Rent
Out thanks to our colleagues at Hoyes, Michalos for sharing this article. They wrote “If you think you’ll be short on next month’s rent, avoid going to a high interest lender for money and instead, ask for a rent deferral. In this post, property management expert, Rachelle Berube, provides actionable tips for how to ask your landlord for a rent deferral or negotiate a rent reduction.”
Wednesday, May 13 Update
Huffington Post check in with a good article on how to defer your credit card payments without hurting your credit score.
Tuesday, May 12 Updates
COVID-19 Updates From Across Canada
Mortgage Professionals Canada is doing an excellent job of curating COVID-19 news and sharing with brokers. Here is a sample of today’s offerings:
- Sadly, the Pandemic Could Be Millennials’ Best Chance to Buy a House (VICE)
- Why housing sales and prices are marching to different tunes (Regina Leader-Post)
- COVID-19 Adds Fuel to ‘Great Migration’ From High-Cost Cities (BNN Bloomberg)
- Consumer sentiment ticks up in Canada amid talk of reopening (BNN Bloomberg)
- Montreal real-estate market hit hard by pandemic (Montreal Gazette)
- Survey finds two-thirds of Canadians concerned about personal financial crisis (CTV News)
- Will Toronto Real Estate Prices Drop this Summer? (REMAX)
- How COVID-19 Could Impact Hamilton’s Real Estate Market: RE/MAX (Toronto Storeys)
Sunday May 10, 2020 Update
Free Credit History Reports Through the COVID-19 crisis
Both Canadian credit reporting agencies are giving free instant online access to your credit report. This is a great opportunity for you to check and make sure there are no reporting errors.
If you feel you need to miss a payment on your mortgage, car loan or credit card, it’s really important you contact your lender and come to an agreement. Such deferrals should not be adversely affecting your personal credit report. You can keep track with these free options.
Friday, May 08, 2020 Update
Flexibility for Canadian Taxpayers – Tax Filing Deadlines Extended
To provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency (CRA) will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.
For individuals the return filing due date will be deferred until June 1, 2020. However, the Agency encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined.
The Canada Revenue Agency will allow all taxpayers to defer, until August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020.
This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.
Wednesday, May 06, 2020 Update
How Gloomy Is Our Economic Outlook?
Over at , they are reporting we are inevitably heading towards a Depression in the middle of this decade. This is from economist Nouriel Roubini, who predicted the 2008 financial crisis.
Will Changing Immigration Into Canada Affect Real Estate Values?
This is already a major point of discussion in The Vancouver Real Estate Market, even as home prices shunted the national averages and increased slightly in value in April, 2020. Immigrant buying has long fueled the GVA market and it sure looks like COVID-19 is going to curtail immigration at least in the interim. Check out this article at Mortgage Broker News.
Tuesday, May 05, 2020 Update
Quarantinis, Coronials and Covidiots – Where Do These New Words Come From?
Over at Ketchum, Chris Ditner has written a terrific piece on why we invent new words. The current COVID-19 crisis has spawned a bunch of memorable terms which are already in daily use. A great example is the Quarantini :
My personal favorite is the Coronials; they are the newest version of millennials and a direct result of COVID-19 creating a baby boom.
Friday May 1, 2020 Update
What About All Those Travel Reward Points?
Some things just don’t seem as important as they used to. Back when we were all conspicuous consumers and accumulating credit card rewards, travel seemed like the number one objective. But that has changed and may well change for a long, long time. This article breaks down rewards cards from different issuers, and discusses the pros and cons of waiting to redeem for travel, versus buying gift cards or consumer goods now.
Condo Vacancies Are Rising In GTA and GVA
I have been harping for some time we are going to see a reset of the GTA and GVA condo markets. Short term rental units will soon glut the market – whether for sale or rent, and this will result in some price reductions and rent rate reductions. No reason to think it will be disastrous, as these markets are still highly desirable places to live in, but we should no longer assume these are sellers’ markets. Check this article out
Americans Are Saving Money Like Crazy
New York (CNN Business) Americans are so nervous about the state of the economy they are stashing cash in the bank at a rate not seen since the first year of Ronald Reagan’s presidency. I wonder what the comparable stats are for Canadians?
The United States government’s Bureau of Economic Analysis reported Thursday morning that the savings rate surged to 13.1% in March — up from 8% in February. That’s the highest savings rate since November 1981. Americans had $2.17 trillion in savings last month.
Thursday, April 30, 2020 Update
The Ultimate Financial Guide to COVID-19: How to Protect Your Finances During the Coronavirus Crisis
We are always ready to give credit where credit is due. These folks have done a great job of presenting at a glance some high level information in re your personal finances during and after the COVID-19 crisis. Worth bookmarking. You can find the article here.
Tuesday, April 28, 2020 Update
Should You Pay The Rent on May 01, 2020?
We are approaching another month end, and everyone is holding their collective breath wondering what will happen with rent payments. According to NOW magazine, 85% of all rents due were paid on April 1. Other sources say it was more like 75%.
With CERB Benefits kicking in since then, there is optimism the percentage paid on May 1 will hold steady or even increase. Again, others have said if you think April 01 was bad, this month will be much worse. Time will tell.
Investors with their rental units are antsy hoping they don’t have to worry about missed payments, since they still have their own mortgage, taxes and maintenance fees to pay. Public sympathy only goes so far – fair or not. If you are renting your home it might be tempting to think you have immunity now and can skip or reduce your payments with no recourse.
But as a tenant, you really need to foster a win-win approach not an win-lose approach. If your landlord runs into difficulties, they maybe forced to sell and then you will be stuck without a home and a lousy payment record to support your application for new digs. Even if that does not happen, when the courts open and life returns to some semblance of normalcy, you may find yourself in the midst of eviction proceedings.
Keep the dialogue open with your landlord and together you can come through this phase with your dignity and finances intact.
What is Happening in The Stock Markets?
Are People Still Buying and Selling Real Estate in The Greater Toronto Area?
Canadian Mortgage Trends’ chief editor Steve Huebl reports sales in Toronto are down 69% for the first part of April. The article is here.
“All of the COVID-19 related issues and measures have translated into a temporary drop in the number of transactions—a drop that will persist until we experience a meaningful and sustained decline in the number of cases,” noted Michael Collins, President of TREB, in a statement.
Toronto Storeys reported Condo Sales Are Down 80% in Toronto. You can see why – condo buildings are more of an at risk environment than single family homes with so many people living together in a small space.
Carolyn Ireland from the Globe and Mail reported how the coronavirus crisis has really changed the landscape for buying and selling homes in the GTA.
The premise is simple enough. With social distancing measures and no open houses allowed, listings are down and the number of buyers willing to go in and out of other people’s homes is also small. Carolyn wrote “Real estate sales in the Toronto area are slowing to a trickle as sellers delay listing and some buyers try to wrangle a “COVID discount” on deals they’ve already struck.”
Overall, I can tell you from our own client base – there is no panic selling out there. Instead we are seeing a more orderly and balanced approach to the process. Up till early March, we had 2016 like madness – replete with bully offers; multi offer listings attracting dozens of offers, and often the winning buyer paying a record high price.
Our buyers report the process is not so stressful – fewer offers, and properties more likely to be priced at market value as opposed to at a steep discount.
Friday, April 24, 2020 Update
Canadian Mortgage Trends reported 1 in 20 Canadians have already missed a mortgage payment due to COVID-19.
Silver linings – CBC reports some people are actually saving money and getting ahead during the pandemic. No where to spend money – it all comes down to essential spending and nothing else.
Rental rates in Toronto must be headed downwards. This report from Toronto Storeys supports my own theories. Rents will go through a transition and adjustment in the months to come. People are paying what they can afford and not what their lease agreement necessarily says. It will all get sorted out in future – with lower rents and declining values of condos due to lower rents; and investors heading for the exits.
Saturday, April 18, 2020 Update
When the CERB benefit program went live April 6, our own Ayesha Taylor immersed herself in learning all she could about the program and its workings, and its interrelationship with EI claims. She reached out to thousands of Canadians via social media and asked them to share their experiences. Since then, she has repackaged all this incredibly valuable intel into one place, and it turns out thousands of people every day are coming to our website to read her material.
She set up an advice desk (email@example.com) and has fielded tons of questions there, on social media and at the askross website itself.
Just to be clear, we are not in the business of advising people regarding EI and CERB claims. We are a small, but long-established financial services company, whose family members and clients were reaching out to us for guidance. Since so many needed help, we decided to share our learning more broadly to the general public.
Of course, the last word on these matters is with the Government of Canada, not with the team at ASKROSS.
We think of this as our public service initiative. We sincerely believe it is important we come together as a country to help one another, and we will make our best effort to continue providing reliable, relevant, and helpful information in any way we can.
Friday, April 17, 2020 Update
Toronto Rents Are Starting to Fall During the COVID-19 Crisis
It is my view we are headed for a total reset when it comes to rental rates in Toronto – especially in the condo market. For years, investors and landlords have had this feeling of invincibility that owning a condo and renting it out (whether long term or Airbnb) was a license to print money. And for many, it was!
But many Torontonians sought rent relief on April 1, and you can expect more such requests for May and June. There is a no-eviction order during the COVID-19 crisis, and besides, the courts are closed too.
It’s very tough on landlords, since they still have to pay their own mortgage payment, maintenance fees and property taxes. If tenants push the rent deferral or forgiveness thing too hard, they may find their landlord has no choice but to put their home on the market and sell it.
So the best thing to do is for tenants and landlords to collaborate and come up with a win-win outcome as opposed to a win-lose outcome.
NOW Magazine online just published a great article on this topic. Toronto Rents Decreasing Month by Month: Report
One interesting point they make is former Airbnb listings are being injected into the long-term rental market, potentially increasing the vacancy rate.
We will be hearing a lot more about declining rents in the months to come. At the end of the day, it will be a good thing, as the amount of money people have been forced to spend for very little living space was simply too much!
Thursday, April 16, 2020 Update
TransUnion unveils research assessing pandemic’s effect on consumer finances. Almost 2/3 Canadians Adversely Affected
- Nearly two-thirds (64%) of Canadian household incomes surveyed negatively impacted by COVID 19, a 6% increase compared to the prior week
- Canadians financially affected indicate it was due to either a reduction in working hours (30%), losing their job (25%), or a partner losing his/her job or having reduced work hours (24%)
- Of those impacted, 67% continue to be concerned about their ability to pay bills and loans – down slightly from 70% the prior week
- Impacted Canadians said they will not be able to pay credit card debt (53%), followed by rent (42%), utilities (39%)
- 36% of surveyed Canadians are reaching out to lenders to discuss payment options
Here is the entire press release from Trans Union Canada
Classy Act By Accountants Providing Tax Prep Services Free to Health Care Workers
Ontario Accountants want to help health care workers fighting the COVID-19 pandemic by offering to prepare their taxes free of charge. Hopefully other provinces will roll out something similar.
The program has been organized by the Chartered Professional Accountants of Ontario, and covers cover a wide range of workers including nurses, paramedics, cleaning staff, lab technicians and others as well as the returns for spouses and dependent children. They can sign up for the program, and are asked to apply by May 15 so that accountants have enough time to process all of the requests. (Thank you to the Globe & Mail for providing this information)
Wednesday, April 15, 2020 Update
Many Fewer Chinese Home Buyers in Vancouver Market Because of COVID-19 Border Closings
Canadian Mortgage Broker News reported today “The influx of Chinese home buyers in Vancouver has noticeably thinned over the past month, according to a recent RE/MAX analysis.
“With the closing of national and international borders as a response to the pandemic, real estate players within the metro Vancouver market have noticed a marked decrease in the number of Chinese travellers and buyers, particularly around Chinese New Year- a hot time for foreign buyers,” RE/MAX said.”
Click here for the full article
Tuesday, April 14, 2020 Update
Israel’s Coronavirus Exit Strategy
All eyes are on Israel’s plans to bring society back online in a series of four discrete steps, each one with a built in two week buffer. It seems logical, and we wish them the very best.
This could help other countries develop a blue print for trying to restore normalcy. As Haaretz news puts it, “High tech and pre-schools first, malls and sports last. Thanks to Morning Brew for this story.
B.C. Government Offers Rent Subsidies to Those in Need
B.C. just launched a $300 to $500 rent supplement. Announced over a week ago but officially available April 9, the program, offered through B.C. Housing, will provide $300 per month for eligible households with no dependents and $500 per month for eligible households with dependents. For full details, you can check out the news at the Burnaby now website.
Monday, April 13, 2020 Updates
Massive Insolvency Storm on the Canadian Horizon Due to Business Closures and Job Losses?
One year ago BNN Bloomberg reported 48% of Canadians were maxed out and on the brink of insolvency. This was the result of a survey conducted by respected insolvency firm MNP Ltd. It should be no surprise to hear that insolvencies in Canada hit a ten year high in February 2020.
What is scary is that this does NOT yet reflect any impact of the COVID-19 pandemic. There is a massive storm brewing as many Canadians find their household income suddenly reduced because of loss of employment or business closures, and despite a terrific effort by the Canadian Government to patch things up with emergency benefits, the fact is too many people are living too close to the edge – with absolutely no wiggle room.
Last week, Better Dwelling reported that insolvencies across Canada are up almost ten percent year over year. They wrote:
There were 11,575 insolvency filings made in February, up 9% from the same month last year. Ontario is leading the charge. In the 12-month period ending in February, there have been 142,884 filings – up 9.9% from last year. The annual rate of filings is the highest for the month since 2010. Growth is also accelerating from a month before.
Sunday, April 12, 2020 Updates
How Do I Minimize Impact of Late Payments On My Credit Report During COVID-19 crisis?
One month into the COVID-19 crisis, many Canadians have already been adversely affected in ways which could affect them for many years to come.
Sudden job loss or reduction of income has forced people to prioritize their spending – not enough money to pay the mortgage or rent payment, property taxes and strata fees, utilities and other life necessities. Credit cards, loans, and other consumer debt all expect to be paid each month too.
Missed payments could show up on your credit report, and stay there for six years!
It is always best to communicate with any party you owe money to, if you have any designs on missing or skipping a payment. Rather than wallow in anxiety, get in front of these problems and ask key creditors for their consent or permission to defer payments.
If you simply stop paying, eventually some of that is going to end up reporting negatively in your personal credit history. Late payments can really drag down your score.
Our strong advice is keep a permanent record of all late and deferred decisions you make. Record the date the payment was due and the date you contacted the creditor. Who you spoke to, what was discussed and agreed. And take note of exactly when you made subsequent payments. Save any email or written correspondence.
Saturday, April 11, 2020 Updates
Where Is the Stock Market Headed?
Guest Opinion and Analysis
by Paul Paetz, Atlanta
With the economic turmoil, and once-in-a-lifetime situation that people, businesses and governments are facing, many are trying to look ahead to how it will all shake out when the pandemic is over. How much will long-term unemployment rise? Will I have a job? Will the housing market fall? What businesses are likely to fail or be severely crippled? Will my employer recover? What is going to happen to my investments and my retirement accounts? Will international trade and supply chains suffer enduring disruptions?
A huge question for many is whether the more than 30% drop that the stock market suffered from its peak is over, and whether the new market levels represent a generational buying opportunity. It may well, but my strong advice is to urge caution and prudence. Now, more than ever, ordinary investors should not buy anything where they can’t afford a total or major loss.
Why is it different this time? Why might the markets not bounce back the way they did after the 2002 Internet bubble burst, or after the financial markets collapse in 2008, or going back further, the Black Monday crash in 1987? Conventional wisdom has become that markets always recover and the only losers are the sellers (or those forced to sell because of margin calls).
Understanding How the Stock Market Operates
The stock market is not based on facts (in the short term) but on sentiment. The stock market is more like a casino than a real market. The major players are betting (and I do mean betting) on which businesses will do well in the future based on macroeconomic trends, political events, long-term socioeconomic trends, technology changes, catastrophic events, banking or major business failures, and so on. They stick their collective fingers in the air to try to gauge which way the wind is blowing, make an informed guess, and then place their bets.
Yes, technically the value of a company is based on the present value of its future earnings, but for most companies that means 10-15x their current earnings (historically). Yet today, a corporation like McDonalds has a P/E ratio of 23-24 (which used to mean the market was expecting way above average earnings growth) after the crash of a month ago — a blue chip company that has very limited growth prospects. There are no major companies that trade anywhere close to historical P/E averages.
Sentiment Is What Matters
In other words, sentiment, or opinion is more important than facts in the short term. Facts matter in the long term. Which is why when the stock market implodes, it’s not because of what happened yesterday, but usually because of structural problems over a long period of time that some event made obvious. That event pricks the bubble and we see a major market correction. At 30,000 the market was getting ahead of itself — we’d already had the longest bull market in history, with earnings multiples significantly higher than historic averages (i.e. many popular stocks were grossly overpriced with little prospect of ever achieving an NPV equal to their price).
Many ordinary people felt emboldened by its rise and without proper knowledge or understanding of risk. we had a classic case of too many people chasing too few opportunities pushing prices up (sounds like Toronto real estate, or Dutch tulip bulbs). The stock market bounce of 25% off its lows of a few weeks ago is the result of positive news from Wuhan plus monetary policy (every major country pumping trillions into their economies to try to keep them afloat), plus historically low interest rates globally, as governments attempt to provide stimulus.
Longer term, Wuhan doesn’t mean anything, and the fiscal and monetary policies will result in extreme inflation, and we will still have lost months of productivity with enormous numbers of businesses failing and long term unemployment at levels none of us have seen in our lifetimes, if ever.
So, the sentiment has turned briefly as we look optimistically towards a day when we can return to the office and resume normal life based on the positive news from China and hope that government actions will enable us to return to growth. But, my point is that we don’t yet know the long term with precision, (although I’d suggest that down is more likely than up for the next few years until the shock has worked its way through the system) which way things are heading. We have no prior experience to base predictions on. But the likelihood that this is the time to buy back in is next to nil for the average person.
Much Volatility Ahead
There will be large volatility bumps still to come, and we will see some major business failures (what is the impact of COVID-19 on companies like Macy’s, McDonalds, Marriott, any of the airlines, etc, and what is the impact of all these debt payment deferrals), not unlike the banking dominoes of 2007-2008. And will the government relief efforts, which are effectively pumping trillions of new dollars into the economy, result in massive inflation down the road to pay back the debt we are running up now?
And sentiment will change by the week. It is very high risk, and for some, that means very high reward. But it also means that most average people who dabble now will get burned. Anecdotes and luck notwithstanding.
If a professional analyst opinion is what you seek, then we should at least consider a balanced view. Obviously many have jumped back into the market seeking bargains after the historic COVID-19 drop. But, this analyst has noticed a pattern that I thought I saw a few weeks ago as well. This Brutal Bear Model Predicts Nightmare 70% Market Crash
Many are calling it a “dead cat bounce“. The stock market pattern over the last 3 months mirrors the Great Depression pattern almost exactly, and that played out over a period of 4 years before it bottomed out, with several intermediate bounce backs followed by more steep drops.
I’m intimately familiar with this curve because of a company I worked with about 15 years ago which is now part of Morningstar — they sold historic ticker data and big data analytics based on pattern matching across all industries, and it worked remarkably well for making predictions.
And reading this recent CCN article should make you sit up straight: Dow Jones In Denial As Gut Wrenching Unemployment Data Hits
So What Should the Average Investor Do?
I think it’s much safer to stay focused on what is happening in real time. I think there is great risk for the average person-on-the-street to gamble right now on a marketplace that none of us (me included) can accurately predict.
We don’t know how many businesses will fail. We don’t know whether COVID-19 will be a seasonal event with social distancing becoming the norm. We don’t know how long the current crisis will last, or whether the disease will re-ignite when people go back to work and start living normal lives again. We don’t know how many people will return to work. And, we therefore can’t know what the long term prospects for growth and profitability are that underpin stock prices.
In my view, people should be very cautious with their life savings and investing in the stock market right now.
Thank you Paul. I confess it’s all beyond me, and best left to the investment professionals. In spite of the tragic events unfolding across the USA, the Dow Jones Industrial Average (DJIA) is already up around 12% for the month of April. And since I first March 23, the DJIA is up a staggering 24% !
Wednesday, April 8, 2020 Updates
Will My Credit Card Forgive My Monthly Payment Because of COVID-19?
We think this will be an evolving topic the deeper we go into the lockdown and the more Canadians whose lives are impaired by reduced income. In Vancouver, Vancity Credit Union gets a GOLD STAR for temporarily cutting their credit-card interest rates to zero and also deferring minimum payments for those customers who are facing financial difficulty.
How Do You Apply for the COVID-19 CERB Benefit in Canada?
More than one million Canadians lost their job in the month of March alone. Kudos to Ayesha Taylor who filmed this really helpful video for all Canadians on how to apply for CERB. Within hours of posting this on Instagram TV @whatyoudidntsee on Monday, she had over 6,400 views so I asked her to put it up on YouTube for a wider audience.
Helpful tip – if you are getting page error messages when you are on the CERB or EI portal, hit the refresh icon on your browser and PRESS/HOLD the SHIFT key till it loads – this will force the page to load properly 👌
We have been getting a lot of calls the past few days on how to apply for CERB – this is our live video tutorial on how to go through the process, which in all honestly was relatively painless in comparison to the EI Benefits application.
We already heard, two days later that applicants from April 6 2020 are receiving their CERB benefits today April 8! Well done to the feds for making this so painless and fast!
If you’ve already applied for EI after March 15th, 2020 and you qualify for less than the $500 weekly amount from CERB – Canada.ca has said that they will automatically bump you up and over to the CERB program and that there is no need to reapply.
If you have any questions about your EI claim or any financial related questions – please email them to us at firstname.lastname@example.org.
Tuesday April 07, 2020 Updates
How Has COVID-19 Changed Mortgage Refinancing? Can I Still Refinance My Home to 80% LTV?
Mortgage lenders are cutting back the amount they are prepared to lend against Canadians homes for refinance purposes.
We have already seen private lenders cut back and have very little appetite for second mortgages. Their comfort zone for second mortgages is now no more than 65% Loan to Value Ratio (LTV), and frankly 50% or less is preferred. Third mortgages – pretty much you can forget that!
A week or two ago some of the B-lenders cut back their maximum refinances to 75% LTV.
And tonight ICICI Bank – an A-lender, announced:
“In light of the events surrounding COVID-19, we have temporarily adjusted some of the features in our products related to maximum LTVs across all of our conventional products. We believe this is a temporary measure until economic conditions return back to pre-March 2020 conditions. “
We wonder if more A-lenders will follow suit.
We actually have a double whammy going on right now. Recent events have made it increasingly more difficult to obtain full appraisals with interior inspections.
Actually earlier today we were told by Chris Bisson of Value Connect that “The Appraisal Institute of Canada sent a communication to its members restricting them from entering a property later today. The exact wording in their message read:
“To be clear, do not go inside a property to complete your appraisals; you can instead use third party data video or photographs.””
And there are far fewer recent sales to refer to when citing comparable properties. The upshot is we are seeing conservatism creep into appraisal values too. Couple these lower values with smaller loan to value ratios and it is increasingly more difficult to refinance your home!
Oh and that’s also assuming you are still working and not on EI or CERB benefits. If you are, you can pretty much fuggedabout it!
Monday April 06, 2020 Updates
As the impact of COVID-19 has spread through the Canadian economy, most day-to-day business that is non-essential has been halted while we wait. Real estate deals are a little different from most consumer-type transactions because they usually take a month or two from the time an offer is accepted until the sale is closed and people move into their new homes. As a result, many are understandably worried about how the coronavirus is changing things and whether they’ll be able to complete their purchases and sales.
We’ve been getting a lot of questions from people whose house purchases were in progress when COVID-19 hit. Today’s update is focused on answers to those questions.
How Are Real Estate Transactions That Were Already in Progress Impacted By COVID-19?
The real estate economy is still running – although how we do things has changed rapidly the past few weeks. Lawyers are now signing up their clients remotely; people are selling their homes without any open houses; and appraisers conducting appraisals without actually going into homes.
How Are Mortgage Lenders Responding to COVID-19?
As the COVID-19 situation continues to evolve, so too does lender responses.
This is really important because some people who were in the middle of a mortgage approval process when the wheels came off society as we know it, may have been laid off or let go.
No two lenders are managing this identically. Be very aware of where you stand at all times.
One of our partner lenders wrote today as follows:
“In keeping with our commitment to provide concise and timely communications, please see below for clarification regarding verification of income at our company. These guidelines are effective immediately.
Income Verification for Applications Already Started
For all approved mortgages that are currently in progress, the “Approved” status will be maintained, provided all of the following conditions are met:
- The application was approved by the insurer as of March 25, 2020.
- The borrower has entered into a legal binding purchase and sale agreement and waived financing conditions as of March 25, 2020.
- The closing date is on or before September 30, 2020.
For all other default insured applications, standard credit and income verification requirements continue to apply.
Uninsured Mortgage (Refinance, Purchase, Transfer) Applications in progress
For applications that were submitted on or before March 31, 2020, and the income condition has been accepted:
- We will honour the closing date without further income review.
For applications submitted on or before March 31, 2020 where the income condition has not been accepted:
- Upload income documentation on Professor.
- Advise your underwriter (via email) if the borrower is laid off and provide the layoff details, including the estimated return to work date.
There are measures in place to protect the approval wherever possible. We will review on a case by case basis. Once the income condition is satisfied, we will honour the closing of the transaction.”
How Can I Complete My Home Purchase Without a Proper Appraisal?
Today a client asked me if she should be worried about one of the conditions on their new mortgage. A full appraisal is required. They are buying a home with exactly 20 percent down payment.
Appraisals are a bit more complex today than a few weeks ago. I answered as follows:
First, values are coming in light because lenders have asked for conservatism. This means if the appraised value comes in less than your purchase price, you will need to come up with the shortfall yourself.
Therefore, if you don’t have extra funds you can tap into, you had better get the appraisal done BEFORE you lift your condition of financing.
Second, the process itself is restricted – they are not going inside people’s homes so they may end up relying on photos and videos by the owner or a virtual tour offered by the real estate agent.
Depending on its contents, you may even offer up an inspection report to assist but I would be leery of that since an inspection catches way more imperfections than an appraisal does. You don’t want your mortgage lender to needlessly fret.
Can My Home Purchase Be Derailed By Loss of Employment?
You do need to be concerned and check for how your particular lender is handling this. If you are not working in an essential business, or if you have already been laid off, lenders are going to worry about your ability to service a mortgage. We submitted an application on April 1, and before the underwriter would even consider the application, we were asked:
“Thank you for your new application; please provide all income documents upfront for review. Also to assist in decisioning your application; please advise on the following:
- Is client’s employment affected by COVID?
- If yes, please explain
- Are they temporarily laid off (in which we wont be able to use income)
- Are they on modified employment
I will wait for the income documents to be uploaded to review further. “
Do You Have Questions About Your Real Estate Transactions or Mortgages?
We will be continuing to monitor changes in the market, and concerns that people have about buying and selling homes. If you have a question that you’d like answered, please write to email@example.com, and we’ll do our best to find the answers for you.
Thursday April 02, 2020 Updates
How Do COVID-19 Mortgage Payment Deferrals Work?
We’re getting a lot of questions about mortgage payment deferral programs. Every lender does their own thing. Some are granting six months’ relief immediately, others might grant one or two months at a time. It also varies whether or not you are with an A-lender or a B-lender or a private lender.
And even within the A-lender world, we are generally seeing credit unions not granting more than two months’ relief so far.
Seems like all the major chartered banks have a similar approach. We can share with you how TD Bank is handling this:
TD Bank on Mortgage Payment Deferrals
To support customers who may be financially impacted by COVID-19, TD is offering mortgage payment deferrals for up to six months.
How does a TD Mortgage Payment Deferral work?
Customers who are experiencing financial hardship can request to defer the equivalent of up to six monthly payments. Interest will continue to accrue and is capitalized (i.e. added to the outstanding balance) on each payment date. This will increase the outstanding balance.
Mortgage payment deferrals will not impact the customer’s credit bureau if the account was in good standing at the time of the deferral and remains in good standing.
Customers have the option to defer their Critical Illness and/or Life Insurance premiums (if applicable). At this time, this option is available by phone.
If TD pays property taxes on the customer’s behalf, the customer can choose to include taxes as part of the deferral or continue to have the property tax payment amount taken from their account. Note: Deferred property tax payments will be adjusted during the annual property tax billing change and regular payment amounts will increase.
The option to defer mortgage payments also applies to rental properties.
How can customers request a TD Mortgage Payment Deferral?
Customers can reach out to TD in the following ways:
- Visit our TD Website at www.td.com/covid19 to submit an online mortgage payment deferral request via EasyWeb online banking. Customers will receive an email response notifying them of the outcome of their application. This is the most convenient option to request a TD Mortgage Payment Deferral.
- Reach out to us by phone at 1-888-720-0075.
Whether your mortgage is with a bank or another type of lender, you need to contact them yourself and find out where you stand, IF you have concerns about your ability to pay your mortgage.
Best to start by going to their website to find out where you stand.
Are Banks Also Offering Payment Relief for Businesses?
Yes, but similar to mortgage payment relief, each bank has their own approach for payment relief for business. Again, we can share how TD Bank is handling it.
TD Bank on Payment Relief for Businesses
Current Relief Available
As we await further details about the Federal Government programs, we are ready to help. If your business is directly impacted by COVID-19 and you are experiencing financial hardship, you can request to defer the equivalent of up to four monthly principal payments on your business term loan and up to six months on your real estate secured business term loan. Some exceptions may apply.
Please note that by deferring loan payments, you are not paying the loan principal, and this means you will pay more interest over the life of the loan. It’s important that you understand this impact.
Check your bank’s website for details on their program, and to make arrangements for payment relief if your business needs it.
407 ETR is making nice with its customers too
“Interest on unpaid balances for use of 407 ETR and/or the Provincially-owned Highways 407, 412 and 418 have been temporarily suspended. We have also temporarily ceased the issuance of plate denial notices on unpaid accounts and have also ceased regular collections programs.
Eligibility under our existing Financial Hardship Program will also be expanded for those who have been impacted by COVID-19. If you need financial assistance under this program, call us at 1-866-237-6471. “
75 Per Cent Wage Subsidy for Small Businesses Expanded
With so many businesses, especially small and service-based businesses, unable to operate due to stay-at-home orders and lack of customers, many have had no choice but to let employees go or furlough them.
Recognizing that many of these businesses may not survive without help, and that the jobs they provide could disappear, the government has stepped up to try to ensure COVID-19 doesn’t wipe out a large chunk of economic activity and result in long-term unemployment problems for Canada.
One of the most significant programs introduced was wage subsidies to small businesses that keep employees on the payroll through the COVID-19 pandemic. That was dramatically expanded this week to include large companies, charities and non-profits.
Melissa Tait in the March 31 2020 Globe and Mail wrote:
“The federal government has vastly expanded the 75-per-cent wage subsidy for small businesses to include large companies as well as charities and non-profits to encourage them to keep workers on the payroll during the COVID-19 pandemic.
Prime Minister Justin Trudeau told his daily news conference Monday that the generous subsidy will be open to any business or organization that has suffered a 30-per-cent drop in revenue as a result of the coronavirus.
“The number of employees you have will not determine whether you get this support. It will apply to non-profit organizations and charities as well as companies both big and small,” Mr. Trudeau said.
Widespread business shutdowns related to COVID-19 have caused an unprecedented surge in layoffs. A government source said new claims for unemployment benefits totalled 1.55 million in the 10 days from March 16 to March 25, the latest data available. The Globe and Mail is not identifying the source because the official was not authorized to share the information.”
COVID-19 Pushing Many Canadians to the Edge; New Survey Finds 49% of Canadians Believe They Are Near Insolvency
One thing we can be certain of is that the COVID-19 crisis will eventually end, and that we’ll carry on and return to a ‘new normal’. However, right now, financial fears are rising due to uncertainty about how long people will go without paychecks while bills continue to come due.
Mortgage Broker News Ephraim Vecina reported:
“Canadians’ fears surrounding their financial prospects have worsened, with a new MNP LTD survey finding that 49% believe that they are just $200 or less away from insolvency.
Moreover, 25% admitted that they are already unable to pay off their monthly bills. Amid the current outbreak, 46% also said that they are anxious about their household debt levels.
“The global crisis surrounding COVID-19 has delivered an unprecedented financial shock to Canadians at a time when personal finances are already a source of stress for many,” the MNP report noted.
“Our results underscore how vulnerable Canadian households are to income interruption. Over the next few months we’ll likely see an unfolding of two crises: the global pandemic and the bursting of the Canadian consumer debt bubble,” MNP LTD president Grant Bazian stated.
“Many households were already limited in their ability to face any kind of financial disruption. Now, all Canadians are feeling the effects on their paycheques, pocketbooks and stock portfolios. Those who were already saddled with a lot of debt are in economic survival mode.”
A further 34% of respondents expressed concern for the possibility of job losses in their households. As much as 30% are not confident in their financial capabilities in the event of lost income.”
Wednesday April 01, 2020 Updates
Government Relief Programs for COVID-19 — Updates and Links
CRA and Income Tax Filing
- While the tax filing deadline has moved from April 30 to June 1, anyone who receives the Canada Child Benefit (CCB) or GST credits should still try to file on time to ensure there in no interruption in receiving those entitlements.
- The Government increased the maximum annual CCB payment amounts, only for the 2019-20 benefit year, by $300 per child.
- The Government will provide a one-time special payment by early May 2020 through the GSTC. This will double the maximum annual GSTC payment amounts for the 2019-20 benefit year.
- To apply for a MyCRA account for personal tax information- https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html. Registering for direct deposit on CRA’s My Account for the quickest and most reliable way to get benefit and credit payments.
- Note – You can create an account with one organization i.e. CRA or Service Canada, log in, and then access the other seamlessly within the same session. Therefore, you just need to sign up for one, which will then provide access to the other.
Canada Emergency Response Benefit (CERB)
- More information should be forthcoming this week on the new CERB that will provide $2,000 per month for 4 months for those who would not traditionally qualify for EI. Applying will likely be through either the EI link (below) or the MyCRA link (above).
- To apply for EI – My Service Canada- https://www.canada.ca/en/employment-social-development/services/my-account.html
Wage Subsidies and Small Business Assistance
- Temporary wage subsidy for employers- https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
- Resources for small businesses- https://www.cfib-fcei.ca/en/small-business-resources-dealing-covid-19
Provincial Relief Programs
- Summary of what each province is offering- https://www.ctvnews.ca/health/coronavirus/emergency-benefits-what-each-province-is-offering-during-the-covid-19-pandemic-1.4869158
Monday March 30, 2020 Updates
Interest Rate Update in Canada
For the third time in a few weeks, the Bank of Canada dropped their key lending rate by 0.5% and it is now at an incredibly low 0.25%.
What does the Bank of Canada rate drop mean for the consumer?
Less than you might be hoping for unfortunately. Let’s consider how interest rates directly affect your life. Let’s jump right into interest rates, real estate and mortgages
Credit cards – nope, nothing has changed yet. Last week Mr. Trudeau spoke about asking the banks and other card issuers to lower their rates. From the National Post “ The federal government is asking banks and credit-card companies to lower interest rates for Canadians, many of whom are struggling financially because of the COVID-19 pandemic.
The government is also looking at extending lower-interest credit directly to consumers, Prime Minister Justin Trudeau said, in his daily update to Canadians on Thursday.”
Car loans and leases – nope, whatever rate you agreed to previously remains unchanged.
And if you are buying a used car through the dealership, rates still start at 5.99% and up.
Mortgages – well if you have a fixed mortgage, sorry but it’s fixed. As in, will not change. If you are looking for a new mortgage, fixed rate mortgages have been edging UP not down in recent weeks.
If you have a variable rate mortgage, congratulations – you look like a rock star. Because the major banks have dropped their Prime lending rate by 1.5% and that means your mortgage interest rate might be the LOWEST IT HAS EVER BEEN !
I did say “might be”.
Because some of the non-bank mortgage lenders have not kept pace with the banks when it comes to dropping their interest rate. My own mortgage lender, whose name I will omit here, have only dropped their Prime rate once so far, whereas the banks have done so three times.
Where is the Real Estate Market Going?
This is a fascinating question. The Toronto market in particular was incredibly strong right up till two weeks ago, and values still seem to be holding up. How long this can last is hard to say.
It takes a few months to create a new norm.
Some people were in the middle of moving for work or family reasons. Or they had already bought or sold their home and committed to a second transaction. They are feeding the engine.
Many realtors are advising their clients not to list at the moment, and many buyers are reluctant to step into someone else’s home at this time.
This Bloomberg article points out there is a sharp drop in number of Canadians searching for homes.
My own view is that the longer we stay in a state of crisis, real estate values will start to drift down. Not uniformly. Some segments will be impacted more than others.
For example, the condo market has been crazy hot for a few years now, and much of it was as a result of investors pumping up the prices and passing their costs on to tenants desperate for a home at any cost. And many of those condos were being used for Air BnB purposes.
And we are aware that the number of unit sales dropped precipitously in March.
But with the short term rental market all but dead, it’s only a matter of time before some of these condo units hit the market. And when supplies exceed demand, prices will fall. You heard it here first.
What are Pricing Strategies in Real Estate?
There are still some sellers positioning for multi-offers. This means they set the listing price well below the price they actually hope to achieve. And they wish to stimulate lots of buyer activity. This might lead to preemptive “bully offers” or a sort of frenzied auction like atmosphere where the final sales price exceeds everyone’s expectation.
This strategy is not nearly as effective today as it was a month ago. Some realtors are dealing with egg on their faces when no offers come in above the fake “low price” they listed at. The result – some pull the house off the market while others reprice higher – closer to the price they actually want to get!
I for one am happy with this development – it is no fun at all to lose out in a bidding war. I spoke recently with Michael Petrant, a highly knowledgeable real estate agent with Right at Home Realty, and he was commenting on a really attractive semi-detached home in the Junction area of Toronto.
“This one is accepting offers any time. I am seeing this strategy employed more and more these days. In a hot market you need the poor offers to help elevate the good ones. Whereas with our current limitations, entertaining poor, misguided offers is too costly. So many folks are deciding to list at a price they actually want.“
Yes this is the new norm folks. That home is still on the market after six days, and is priced very reasonably.In a hot market you need the poor offers to help elevate the good ones. Whereas with our current limitations, entertaining poor, misguided offers is too costly. So many folks are deciding to list at a price they actually want.… Click To Tweet
Where is the Canadian Economy Headed?
Don’t look now but we are in uncharted territory here. The economy is going to take a brutal beating in the coming months. And the longer we stay in lockdown, it is only going to get worse. We have rapidly gone from being a band of happy consumers, looking to win the rat race and spend our hard earned money on keeping the fiscal engine running, and rewarding ourselves with travel, pampering, cars, clothes, sports and entertainment – into survival mode.
Imagine – gasoline is only 60 cents a litre, and who cares? Where are you going to drive to?
This recent Vox article is frightening but perhaps more realistic than any of us want to admit.
The article states that recession is inevitable, and a depression is looming. And you cannot yet imagine what that will do. It isn’t pretty. Massive unemployment and business closures potentially.
Monday March 23, 2020 Updates
The impact of COVID-19 on Canadians’ personal finances is profound and will be long lasting. All the things which give us pleasure and a raison d’être have become secondary to ensuring we are properly coping and surviving in a drastically changing world. COVID-19 is having a profound impact on our way of life, and is affecting your financial health too.
The news is evolving so rapidly, there is a risk that much of what I write here is not current by the time you read it. I am trying to share information, as opposed to being the final word on all such matters. You owe it to yourself to be extremely aware and vigilant about everything going on right now.
I am also relying quite extensively on information shared by respected colleagues and experts in their field. I will properly acknowledge their names as we go along.
Have you have suffered a loss of employment income in Canada?
You need to immediately determine what government assistance is available to you. Anyone looking to apply for EI benefits, can visit the Employment Insurance website.Do not give up on your claim if you feel it is taking too long or if you feel someone is citing some bureaucratic reason why you are not entitled.
Is there relief for mortgage payments in Canada?
If you have a mortgage, you may be entitled to some payment relief. Every lender has their own policies in this regard. It is best you contact them directly. As mortgage industry maven Ron Butler says, “its a program that mortgage lenders adjudicate themselves based on criteria they develop internally. “
Industry colleague David Larock offers 10 key points about deferred mortgage payment programs for COVID-19 on his “Dave the Mortgage Broker” blog:
- They are discretionary.
- No lender is going to forgive your mortgage payment.
- You must be able to demonstrate true financial hardship.
- If you don’t fall into this distressed category, please don’t call your lender right now.
- Deferring mortgage payments won’t hurt your credit score.
- Deferred Payment Programs are typically capped at six months.
- Communication is key.
- A mortgage deferred payment program is for your mortgage payment only.
- Other options are often available.
- Rental property investors may also be eligible.
Is there relief for property tax payments in Canada?
You should check with your local municipality. For example the City of Toronto is to give residents a 60-day grace period on property tax, water and solid waste bills.
Is there relief for tenants to pay no rent in Canada?
If you are a tenant, I am sure you are feeling the pinch too. There are people petitioning for rent payment relief but nothing has been formalized. But remember, if a homeowner defers a mortgage payment, the lender will still get the money in due course.
But if a tenant is forgiven a rent payment, then the landlord will be out that money forever. I am concerned if rent payments are forgiven that the economic impact would be profound and very negative.And if it is a pure deferral, that means the money will have to be repaid in the future. Which will be easier said than done.
Last week the government of France announced a suspension of all rent payments and utility bills during the crisis, but that is not Canada.
Is there relief for Canadian Student Loans?
If you have student loans, the Federal government announced a six-month grace period on Canadian student loans. This is an interest-free, moratorium on Canada Student Loan payments for all individuals who are in the process of repaying their loans. This initiative to take effect March 30. You can also contact Canada Student Loans about a temporary student loan revision of terms.
Is there relief for utility bills and credit cards in Canada?
Yes, every day more and more announcements are being made. In fact, Royal Bank is apparently offering six-month deferrals on credit card payments,. But once that period ends the minimum payment would include all accrued interest from the deferred payments. As they say, there is no free lunch!You all need to understand, so far no one is saying you are forgiven anything! You are being allowed to DEFER payments of various bills.#MortgagePaymentDeferral Click To Tweet
For a discussion on other bills and coping strategies, let’s check in with the folks at Hoyes, Michalos. The following eleven points are from their most recent newsletter.
We know there is stress and anxiety in not knowing if you will be able to keep paying your bills. You may already be out of work or may be worried about the long term impact on your employer and job.
Here are some tips and information that can help you take control of your finances right now:
- The Canadian Government has waived the one-week waiting period for EI sickness benefits for those quarantined due to COVID-19. Application information can be found here:
- In the coming months, the Canadian Government plans to temporarily boost the Canada Child Benefit to help parents cover the cost of child care or other impacts of having to stay home.
- For workers who do not qualify for Employment Insurance and have to stay home due to COVID-19, the Government also plans to offer an emergency care benefit.
- A list of relief benefits for individuals announced March 18, 2020 can be found here https://www.canada.ca/en/department-finance/economic-response-plan.html#individual
- We suggest you cut back on all non-essential expenses as soon as you can. While online buying may be tempting to avoid stores, keep an eye on your boredom spending.
- If you are working, keep up with your bills and debt payments. If you are worried about down the road, make at least your minimum payments to avoid late charges, penalties, and potential negative hits to your credit.
- If you are out of work or expect to be, you may need to prioritize payments. You will want to focus on high priorities like your rent and utilities. You may even want to prioritize your cell phone bill and internet bill if you are self-quarantining at home to ensure you have access to both information and the ability to contact friends and family.
- Some lenders have begun to offer deferral options for mortgages and other credit products to avoid having their customers default. Contact your lender to see if you qualify.
- Take advantage of other deferral or hardship provisions.
- For self-employed and small businesses, Revenue Canada has advised they will be providing an extension for tax filing and payments. Investigate what can help you manage your cash flow but realize you will have to catch up eventually.
- Don’t hesitate to talk with other creditors about a deferral. If you don’t ask, you won’t know what they will say.
For up to date information and advice for anyone carrying debt and have concerns, you can stay current at the Hoyes, Michalos website here. It’s written by Doug Hoyes himself, and is called Managing Bill Payments During the Debt Crisis.
What is happening with Mortgage Interest Rates in Canada?
Rob McLister over at RateSpy is as good as it gets for well researched intel on all things mortgage related in Canada. He says “if you are shopping for a brand new mortgage the safest bet is get a rate hold ASAP.”
The reason is that mortgage interest rates are actually going up these days. Especially fixed rates.The news has been all about recent Bank of Canada rate cuts and the major banks cutting their prime lending rate, but the upshot has been mortgage lenders are concerned there is a looming liquidity crisis. #MortgageInterestRates Click To Tweet
Kelly Neuber from Mortgage Intelligence says “Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in mortgage defaults.”
Here is an article from Steve Huebl at Canadian Mortgage Trends which explains what’s going on. https://www.canadianmortgagetrends.com/2020/03/mortgage-rates-rising/
Is now a good time to have a variable rate mortgage in Canada?
And while the Prime rate has dropped a full percentage point recently, new variable rate mortgages are no longer being offered at deep discounts to Prime.
If you already have a deep discounted variable rate mortgage, you are in great shape. With Prime today at 2.95%, your mortgage interest rate might be around 2%, give or take. But if you are choosing a new mortgage today it will be very hard to find a deep discounted variable rate mortgage. Many lenders have repriced their variable rate mortgages to be around Prime.
And, whereas the banks have all dropped their Prime rate, some monoline lenders, typically a consumer friendly mortgage choice, have not dropped their Prime rate a second time – saying they will decide on April 01. So in this case, the potential savings are not being passed on to their customers.
What type of mortgage rate you choose today still comes down to your own unique risk/reward profile. More than over, you need an expert in your corner.
Susan Thomas, regional manager at Mortgage Intelligence, lightened the mood this week with a graphic explaining the mortgage interest rate outlook:
What about impact of COVID-19 on consumer insolvencies in Canada?
Ross was cited in a recent article on consumer insolvencies, written by Steve Huebl at Canadian Mortgage Trends.
Steve wrote “The rate of Canadians filing for insolvency in January 2020 rose 8.7% compared to the previous month, according to recent data from the Office of the Superintendent of Bankruptcy.
That figure includes both bankruptcies and consumer proposals. Broken down, bankruptcies were down 1.7% while proposals jumped 15.5%. This follows a record year for insolvencies in 2019, which saw a total of 137,178–the second highest number of annual filings in Canada ever, and a 9.5% increase from the previous year.The problem may not necessarily be Canadians taking on more debt, but rather using the credit facilities they already have access to, according to some.#TooManyDebts Click To Tweet
“What I see is a significant number of people who incorporate tapping into available credit as a means to supplement income,” Ross Taylor, a mortgage agent with Concierge Mortgage Group and a licensed insolvency counsellor, told CMT.
“Unfortunately, this beast needs to be fed, as even minimum monthly payments barely make a dent in the balance owing. As time goes by the amount owed becomes overwhelming and there is no logic to continuing.”
Ross adds that the data will only become more bleak in the coming months.
‘Remember that the stats cited in this report are from a period of economic goodness,” he said. “We seem on a collision course with a recession, and when that comes, we will see a further spike in personal insolvencies.’ ”
What is the impact of COVID-19 on Canadian Real Estate?
There seems no doubt that we are approaching a recession, and in fact there is some fear of a pending depression. That’s basically a recession gone very bad. It’s hard to be bullish about anything with such news. Ultimately, it all comes down to how quickly can the world get back to normal. Normal is a strong, healthy real estate market – if anything, it was too healthy and strong right up till a couple of weeks ago.
The home sales process is going through a transition now. Not so many listings and showings as home visits are not prudent during this time of social distancing. This affects potential buyers as well as tradespeople, home inspectors and appraisers. People are adapting. It takes time, and yet all these societal changes are happening really fast.
“The outbreak has shattered seasonality, transforming the spring months, which was normally the time when the housing market was starting to pick up speed, into a period of anxious down time,” Point2 Homes stated in its analysis. “Much of the activity associated with homebuying and home selling is simply on hold, as people and institutions alike are trying to see where the pandemic is headed.”
“There certainly could be long-lasting impacts in terms of shifts in preferences for location and even features of homes,” according to Jim Clayton, director of the Brookfield Centre in Real Estate & Infrastructure at York University’s Schulich School of Business.
“Some people may be more hesitant about being part of a crowd and hence avoid mass/public transit. The work, and learn, from home revolution that many have been calling for over the past decade could become much more of a reality and may change how and where people want to live,” Clayton explained in an interview with Point2 Homes.
But in Toronto and Vancouver, interestingly, we are still seeing activity and people making bully offers to beat out other buyers. This Bloomberg article captures that sentiment well. Hard to say how long that will last but seems like in the city values are holding up.
The Show Must Go On – Appraisals and Real Estate Lawyers
At this time, it is challenging to complete all the normal functions associated with buying and selling a home. Real estate lawyers are essential to the process and The Law Society of Ontario has recently indicated that a lawyer no longer needs to verify clients in person. Alternative means of verification such as a face-to-face communication via video conference will now be permitted.
The appraisal process is transforming too. Some lenders are now accepting virtual inspections – One lender, Magenta has said they will accept appraisals under the following guidelines:
- The appraiser has conducted an interview with the homeowners over the phone or video call
- The homeowners have conducted a live video tour of the property with the appraiser
- Photos are taken by the homeowners and emailed to the appraiser following the video tour
- The appraiser has driven past the property and has conducted a normal exterior inspection
- The written appraisal report includes notes on all appropriate Extraordinary Limiting Conditions and Extraordinary Assumptions
- The appraiser includes details on how the inspection was conducted and lists all sources of information
Standard, full-interior inspections must be completed on vacant properties.
What about investing in the Stock Market with the impact of COVID-19?
Some people have been asking me if now is the time to buy into the stock market. Whether through individual stocks or mutual funds or exchange traded funds. And while it is true that smart money buys when everyone else is selling, I cannot help but feel it is too early to do this. My own view is we are going to see a lot worse before it gets better.
But I am NOT an investment advisor – I am just a guy who has been around for a long time, and I tend to be quite conservative. Talk to the people who are properly trained in this stuff and seek their counsel.
I liked this article from Yahoo Finance on March 23, 2020 which said this stock market has one more giant coronavirus plunge to go. That said, the very next day the stock market surged and had its best day since 1933. The TSX was up 11.96% on March 24, 2020. This was in direct response to massive government stimuli.
In fact, by the end of day March 26th, Morning Brew reported……..
“U.S. markets: Nothing makes sense anymore. On a day when an avalanche of weekly unemployment claims stunned the country, stocks staged their third straight rally. After surging more than 20% since Monday, the Dow is back in a bull market. ”
There will be many more ups and downs along the way. Extreme volatility is a thing. My own view is this is not a time to speculate – day trading is akin to gambling in a casino.
CNN Business’s Anneken Tappe wrote the S&P 500 has fallen nearly 29% since its latest peak on February 19 as investors grappled with what the pandemic would mean for the economy.
My own view is that it will be worse than anyone is predicting at the moment.
“Three conditions need to be met for the market to settle down, according to the BlackRock Investment Institute.
- Visibility on the scale of the outbreak and evidence that infection rates have peaked
- Coordinated and credible policy packages
- Confidence that financial markets are functioning properly.
Progress has been made on #2 and depending on how next week goes, #3 could be in the cards. But the first, and most important point, is still a big question mark. Right now, we are trending in the wrong direction.”
What About Filing Your Income Tax Returns With the Impact of COVID-19?
Most Canadians have until June 01, 2020 to file our income tax return. Normally the deadline was April 30. And if you owe money, you have until September 01, 2020 to pay. No penalties or interest charges prior to September 30.
There are new filing dates for small businesses, trusts and self employed individuals. Check in with CRA online now and then to stay abreast of any further developments.
I can tell you today March 27, that all the clients and family members I know who have filed early have had their tax returns processed very rapidly, and tax refunds providing some much needed boost to their personal bank accounts.
This Week’s Wrap on COVID-19 and Your Financial Health
Someone wiser than me wrote recently that perhaps this is Earth’s way of giving us humans a timeout.