Month: November 2022

Calgary Real Estate News

Canada’s slumping housing market weighs on Home Capital’s loans

The tumult in Canada’s housing market is starting to take its toll on lenders, with Home Capital Group Inc. reporting a plunge in third-quarter originations.

Home Capital, which lends largely to borrowers considered somewhat riskier than prime customers, said Tuesday that single-family mortgage originations plummeted 28 per cent from a year earlier. The lender’s so-called Alt-A borrowers include self-employed workers or those who are new to Canada and don’t have extensive credit histories. Total mortgage originations fell 23 per cent to $1.85 billion (US$1.38 billion), missing the $2.5 billion estimate of Royal Bank of Canada analyst Geoffrey Kwan. 

Sales activity in Canada’s housing market has slowed, with transactions down 32 per cent in September from a year earlier, as the Bank of Canada’s aggressive rate-hiking campaign ratchets up mortgage costs. Prices have fallen for seven straight months, and are down almost 9 per cent from their peak.

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The market spiral had yet to make its way to lenders’ results, with Canada’s biggest banks all reporting growth in their mortgage books in their most recent earnings. Home Capital’s results provide a window into a segment of borrowers who are considered riskier than those the big banks typically take on, and therefore pay more to borrow.

“The housing market is currently in a period of transition as buyers and sellers adjust to a higher-interest-rate environment,” Home Capital Chief Executive Officer Yousry Bissada said in a statement, adding that the Toronto-based company expects “softer market conditions to persist in the near term.”

The drop in originations contributed to Home Capital’s net income falling 43 per cent to $31 million, or 77 cents a share. Excluding some items, profit was 95 cents a share, matching analysts’ estimates.

Home Capital’s shares fell 4.8 per cent to $25.23 at 10:32 a.m. in Toronto, bringing their decline this year to 35 per cent. That’s the fourth-worst performance in the 29-company S&P/TSX Financials Index. 

Despite the market turmoil, Home Capital’s borrowers have continued to make payments on their mortgages. Net non-performing loans accounted for 0.16 per cent of gross loans last quarter. That compares with 0.15 per cent a year earlier and 0.47 per cent in the same period in 2020.

-Bloomberg

Calgary Real Estate News

Winter Checklist

  • Check and clean or replace furnace air filters each month during the heating season. Ventilation systems, such as heat recovery ventilator filters, should be checked every two months.
  • After consulting your hot water tank owner’s manual, drain off a dishpan full of water from the clean-out valve at the bottom of your hot water tank to control sediment and maintain efficiency.
  • Clean your humidifier two or three times during the winter season.
  • Vacuum bathroom fan grills to ensure proper ventilation.
  • Vacuum fire and smoke detectors, as dust or spiderwebs can prevent them from functioning.
  • Vacuum radiator grills on the back of refrigerators and freezers, and empty and clean drip trays.
  • Check gauges on all fire extinguishers, and recharge or replace as necessary.
  • Check fire escape routes, door and window locks and hardware, and lighting around the home’s exterior. Ensure your family has good security habits.
  • Check the basement floor drain to ensure the trap contains water. Refill with water if necessary.
  • Monitor your home for excessive moisture levels – for instance, since condensation on your windows can cause significant damage over time and pose serious health problems, this requires corrective action.
  • Check all faucets for signs of dripping and change washers as needed. Faucets requiring frequent replacement of washers may be in need of repair or replacement.
  • If you have a plumbing fixture that’s not used frequently, such as a laundry tub or spare bathroom sink, tub or shower stall, briefly run some water to keep water in the trap.
  • Clean drains in the dishwasher, sinks, bathtubs and shower stalls.
  • Test plumbing shut-off valves to ensure they’re working and to prevent them from seizing.
  • Examine windows and doors for ice accumulation or cold air leaks. If found, make a note for repair or replacement in the spring.
  • Examine attic for frost accumulation. Check roof for ice dams or icicles. If there’s excessive frost or staining of the underside of the roof, or ice dams on the roof surface, be sure to have an expert look into the issue.
  • Check electrical cords, plugs and outlets for all indoor and outdoor seasonal lights to ensure fire safety. If showing signs of wear, or if plugs/cords feel warm, replace immediately.
Calgary Real Estate News

Bank of Canada expected to raise interest rates on Wednesday as recession fears grow

Even as warnings about a potential recession grow louder, the Bank of Canada is expected to announce another hefty interest rate hike on Wednesday, edging the bank closer to the end of one of the fastest monetary policy tightening cycles in its history.  

RBC senior economist Nathan Janzen says it’s a coin toss between the Bank of Canada choosing to raise its key interest rate by half a percentage point or three-quarters of a percentage point, though RBC is leaning toward the smaller increase. 

“It’s pretty clear that more aggressive interest rate hikes are still warranted,” Janzen said. 

Wednesday’s announcement would make it the sixth consecutive time the Bank of Canada raises interest rates this year in response to decades-high inflation. It also comes amid growing fears that a recession is looming. 

Last week, Finance Minister Chrystia Freeland shifted her tone on the economy from her usual praises of Canada’s strong pandemic economic recovery. She warned tough times are ahead for Canadians. 

“Mortgage payments will rise. Business will no longer be booming,” Freeland said. “Our unemployment rate will no longer be at its record low.”

As well as the interest rate decision, the Bank of Canada will also release updated economic projections on Wednesday in its latest quarterly monetary policy report. The central bank’s outlook on inflation will be key to its plans for any additional rate hikes to come.

Since March, the Bank of Canada has raised its key interest rate from 0.25 to 3.25 per cent, feeding into higher borrowing costs for Canadians and businesses.

And although inflation has been slowing in recent months thanks to tumbling gas prices, the central bank has made it clear it doesn’t believe its job is done just yet.   

“Simply put, there is more to be done,” Bank of Canada governor Tiff Macklem said during a speech in Halifax on Oct. 6.  

As the Bank of Canada raises interest rates to bring inflation back to its two per cent target, officials at the central bank have expressed concern about how high inflation still is and its impact on consumer and business expectations for future inflation.  

In September, the annual inflation rate slowed to 6.9 per cent, though the bank’s preferred core measures of inflation, which tend to be less volatile, were unchanged from August. 

Grocery prices also continued to climb, with the cost of food up a staggering 11.4 per cent compared with a year ago.

There is some good news for the Bank of Canada on the inflation expectations front. Its recent business outlook survey showed businesses expect wages and prices to rise more slowly as their overall inflation expectations have eased. 

The good news, however, won’t be enough to dissuade the bank from another sizable rate hike, Janzen said.  

“There are some indicators that we’re past peak inflation rates. It’s just those inflation rates are still too high, currently, and still way too broad right now to prevent additional interest rate increases,” Janzen said.  

Most commercial banks expect one more interest rate hike after October before the bank hits pause on one of its most aggressive rate-hiking cycles in history.  

The effect of these rate hikes is expected to be felt more broadly in the economy next year as Canadians and businesses adjust their spending.  

While there is some division among economists on how severe the impending economic slowdown will be, many economists estimate the chances of a recession have grown.  

Recent surveys from the Bank of Canada reveal most Canadians and businesses also believe a recession is on the way. 

However, many economists have highlighted that Canada’s tight labour market might serve as a buffer during an economic downturn. In September, the unemployment rate was 5.2 per cent, which is considered to be quite low. 

Although the Bank of Canada has previously spoken about aiming for a “soft landing,” where inflation comes down without triggering a serious economic slowdown, Macklem said in recent weeks that the primary goal of the bank is to restore price stability.  

That commitment has sparked worries in labour groups, which have come out against the aggressive rate-hiking path over concerns about the potential impact of a recession on employment.  

A new report by the Centre for Future Work in collaboration with the Canadian Labour Congress is calling on the Bank of Canada to pause its rate hikes until it can assess the impact of previous interest rate increases on the economy.  

“After three years of dealing with both the health and the economic consequences of an unprecedented pandemic, the last thing Canadians can tolerate is another recession,” the report by Jim Stanford reads.  

Stanford, an economist and the director of the Centre for Future Work, makes the case in the report for a different approach to addressing high inflation.  

Instead of continuing along the path of higher interest rates, Stanford recommends the Bank of Canada balance its goal of restoring low and stable inflation with promoting economic growth and maintaining employment.  

In the report, Stanford also calls on the federal government to play a more active role in fighting inflation by exploring options such as tax increases on high-income earners and windfall taxes on profitable corporations.