How Major Events Impacted Mortgages in 2018?
To say that the mortgage industry experienced some excitement in 2018 is an understatement. Everything from new borrowing regulations to trade tensions and immigration left their mark on the Ontario housing market, and by extension mortgages.
Let’s examine some of the major events that impacted mortgages in 2018.
Financial stress test.
In January of last year, the federal government introduced a new financial stress test that borrowers had to pass in order to get a mortgage from a federally regulated institution. Suddenly, this meant that prospective homeowners could afford less of a home and many current homeowners had fewer borrowing options available at mortgage renewal time. The stress test also had a particular impact on millennials, many of whom now say they are waiting longer to purchase a home.
Bank of Canada raised interest rates.
Not once. Not Twice. Not even three or four times – but 5 times in 2018! So despite home prices falling in many areas of the country, the rate of affordability still remained low for many Canadians.
Tech boom in Toronto.
Since 2012, Toronto has gained a record number of jobs in the technology sector – even more than Silicon Valley in the same time period! And now with recent announcements from Microsoft and Intel, that number is expected to rise even more. While this is great news for the city, it also means that more professionals will be moving to the area hoping to land these high paying jobs. And of course, as demand for housing rises, so will prices.
NAFTA tensions eased.
For much of 2018, Canadian economists were especially concerned about what a new NAFTA deal would look like. In particular, with the threat of large tariffs looming, the Bank of Canada had been keeping interest rates low in preparation for what such tariffs might do to the economy. As the deal unfolded into the new USMCA however, it became clear that imports such as Canadian automotive parts would not be slapped with a huge 25% tariff. This has given the Bank of Canada more confidence to move toward what they are calling a “normal” interest rate.
Increased immigration impacting demand.
2018 has also been a year of increased immigration to Canada with many newcomers settling in already high-demand, low-supply areas such as Toronto. This trend is expected to continue into the New Year with as many as 330,000 new immigrants anticipated in 2019.[i] And since it can be difficult for newcomers to obtain mortgages with traditional lenders, this will present more opportunities for alternative lenders.
Despite the challenges of 2018, the year also presented many opportunities. If you are interested in obtaining a mortgage this year, don’t let the challenges of last year hold you back. Contact Matrix Mortgage Global today to discuss your options.