CIBC Private Wealth
October 04, 2024
Money Wellness Education Financial literacy Economy Commentary News Weekly updateMorning Market Brief
The Office of the Superintendent of Financial Institutions (OFSI) said Canadian homeowners are handling current credit conditions better than originally expected. OFSI was concerned about whether Canadian homeowners would be able to successfully navigate through elevated inflation and high borrowing costs and avoid a financial downfall. While OFSI still sees some risks to the credit market, it has been encouraged by the resiliency of Canadian homeowners.
- Given the relative strength of Canadian homeowners despite tight financial conditions, OFSI doesn’t believe that credit conditions will weaken enough to drag down overall economic conditions. OFSI raised standards for mortgages as the real estate market was climbing higher, which has helped reduce troubles in Canada’s mortgage market.
- The Canadian federal government has recently announced some changes seeking to make it a bit easier to get a mortgage. OFSI cautioned that this could create some risk in Canada’s credit markets.
- The government will allow mortgage default insurance on homes up to $1.5 million, up from the current maximum of $1 million. Potential homeowners can make offers on more expensive homes without the 20% down payment, provided they purchase insurance.
- The government will also allow 30-year mortgages to first-time home buyers and those purchasing a newly built home. Previously, only 25-year mortgages were available to buyers who had default insurance.
The federal government hopes this will expand the pool of potential home buyers, particularly younger Canadians who have largely been priced out of the market. These new rules and more rate cuts from the Bank of Canada (BoC) could result in a pick-up in real estate market activity. The BoC makes its next interest-rate announcement on October 23.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.