Greater Number of Mortgage Applications Expected for 3rd Quarter of 2019

Published April 8, 2019 by Real Estate Leads

It’s well understood by those in the Real Estate industry that the housing market in Canada has been ‘Flat’ for quite some time now. Putting that in perspective for people who like to understand things more simply is to say that the average value of homes is neither increasing or decreasing for the most part. This of course has the effect of making fewer homeowners decide to put their homes on the market, as the majority of them will be aiming to sell their home for as tidy a profit as possible.

This trends has been countered by the fact that new housing development starts are up across the country this year, and in hot markets like Vancouver and Toronto there is a focus on having these starts be in building more affordable housing. That’s a very relative term, to be sure, but to make a long story short there are more new homes coming onto the market to counter the lack of existing homes found on it.

As realtors, that’s a bit of good news and something that should mean greater numbers of first-time homebuyers looking for expert guidance. Here at Real Estate Leads, our online real estate lead generation system is designed to fast-track you being put in touch with both home buyers and sellers, and as a realtor that ought to sound mighty good. But enough about that for now, let’s have a look at why the aforementioned information is pairing with a new forecast that should foster even an even more positive outlook for realtors in Canada.

Mortgage Applications Expected to Spike – Here’s Why

There are indications that there could be a spike in mortgage applications in the third quarter – provided a rate forecast comes to be sometime over the next few months. This is because the Canadian Real Estate Association’s economists are expecting interest rates to go down as the year progresses, and this in response to weaker economic conditions forcing the BoC (Bank of Canada) to hold steady with their rates.

It’s assumed that if 5-year bonds maintain their current level then there should be a shift seen in the 5-year qualifying mortgage rate. It hasn’t moved for almost a year now, and the premise that it might will mean some good news for would-be homebuyers. All of this of course needs to be tempered by the continuing realities of the new mortgage stress-test regulations introduced last year. There’s no getting around the fact that it’s harder than ever for first-time homebuyers to qualify for a mortgage in Canada.

Dip in Qualifying Mortgage Rates

The BoC forecasts that 5-year qualifying mortgage rates will fall from 5.34% in the 1st quarter of 2019, to 4.99% in the 2nd quarter, and reaching a year-low of 4.84% in quarter 3. They go further then to say that rates are then expected to climb to 5.15% in the 4th and final quarter of 2019 and early 2020 before reaching a plateau of 5.34% for the remainder of next year.

The next thing that needs to be considered is discount rates on qualifying mortgages. The BoC’s predictions there are as follows:

5-year average set for a drop to 3.44% in Q2 2019 (as compared to 3.60% in Q1

  • Drop to 3.30% in Q3 of 2019
  • Climb back to 3.44% in Q4 of 2019
  • Climb again to 3.64% in 1st and 2nd quarters of 2020
  • Climb again to 3.74% in 3rd and 4th quarters of 2020


Expectations for Rate Cuts

Some economists believe the Bank of Canada may in fact cut rates in 2019, as opposed to just maintaining their current level. Others believe oppositely that what we’ll see is a rate freeze. One area where there’s some consensus on this is that they will likely move towards a neutral interest rate, but only in the long term. The reason for this being that the corresponding hike in the level at which mortgage borrowers are stress-tested will result in that policy now being unsustainable so long as the current methodology is employed.

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