2012 Mortgage Market Review

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Here is a summary of the events that shaped the Canadian mortgage market in 2012, as presented to the Real Estate Investment Network by Calum Ross.

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2012 Mortgage Market Review

  1. 1. 2012 YEAR IN REVIEW & WHAT’S NEXT MORTGAGE MARKET UPDATE With Calum Ross for REIN CALUM ROSS MORTGAGE
  2. 2. What happened in 2012?1) Mortgage rate wars and shift from variable to fixed rates2) Mortgage regulation changes produced an effective rise in interest rates3) Housing market cooled slightly in Q4 in select segments, and set the stage for 2013January 2013 CALUM ROSS MORTGAGE 2
  3. 3. MORTGAGE RATE MOVEMENTS CALUM ROSS MORTGAGE
  4. 4. Mortgage rates: long-term trend7.00 EFFECTIVE HOUSEHOLD6.00 INTEREST RATE %*5.004.003.00* Source: Bank of Canada. The effective interest rate for households is a weighted-average of various mortgageand consumer credit interest rates. The weights are derived from residential mortgage and consumer creditdata, adjusted for additional information provided by financial institutions.January 2013 CALUM ROSS MORTGAGE 4
  5. 5. Mortgage rates: short-term trend2012 MORTGAGE RATE 1) Bank ofHISTORY* Canada did6.00% not move the5.00% 5-year Qualifying target rate4.00% Mortgage Rate3.00% Prime Rate 2) Fixed2.00% posted rates stayed flat* Source: Bank of CanadaJanuary 2013 CALUM ROSS MORTGAGE 5
  6. 6. Behind the data * Source: CAAMP• The Prime Rate flat-lined , but variable mortgage rates actually rose• The spread between variable and fixed rates shrunk, and the fixed mortgage became more attractive• Discounted 5-year fixed mortgage rates hovered near 2.99% throughout 2012Variable rate Jan. = 2.10% *% New fixed rates = 79%Variable rate Dec. = 2.70% Existing fixed rates = 65%January 2013 CALUM ROSS MORTGAGE 6
  7. 7. MORTGAGE RULE CHANGES CALUM ROSS MORTGAGE
  8. 8. Timeline of tighteningPRE-JUL 2008 APR 2010 JAN 2011 JUN 2012100% Qualifying 30yr 25yrfinancing Rate amortization amortization40yr 90% refinance 85% refinance 80% refinanceamortization LTV LTV LTV5% down 20% down No insured No insuredrentals rentals HELOCs $1M+ January 2013 CALUM ROSS MORTGAGE 8
  9. 9. New mortgage rules brought to life *CBC Infographic PLUS, buying a home over $1M? CMHC -> Need 20%January 2013 CALUM ROSS MORTGAGE 9
  10. 10. GTA HOUSING MARKETvia CMHC Housing Outlook and CMHC Data CALUM ROSS MORTGAGE
  11. 11. Rental vacancy rate remains low Vacancy rate wasRENTAL VACANCY RATES 1.7% in Oct. 2012 Lower vacancy rate expected in 2013 at 1.5% High-rise vacancy rates lower at 1.2%„„ Demand for new units matched increase in supplyJanuary 2013 CALUM ROSS MORTGAGE 11
  12. 12. Housing starts slowingHousing starts forecasted to drop in 2013after a spike in 2012, especially in high-riseJanuary 2013 CALUM ROSS MORTGAGE 12
  13. 13. Average home prices levellingAverage prices continue to climb but areforecasted to stagnate in 2013January 2013 CALUM ROSS MORTGAGE 13
  14. 14. GTA condo market insights1) The opportunities for short-term pre- construction condo investing “flips” winded down, but long-term investors will remain active buyers at pre- construction2) Affordability shifts and changing demographics are supporting growth in condo lifestyle3) Plus, other interesting tidbits…January 2013 CALUM ROSS MORTGAGE 14
  15. 15. New high-rise carrying costs to pass rentsHarder to find cash-flow positive high-riseunits in the futureJanuary 2013 CALUM ROSS MORTGAGE 15
  16. 16. WHAT DOES IT ALL MEAN? CALUM ROSS MORTGAGE
  17. 17. 2013: The year ahead• Interest rates to remain low and steady• Mortgage lending environment unlikely to change in Q1 or Q2 of 2013• More lenders to enter the market to accommodate real estate investors and harder-to-place mortgages **Real Estate Investments to remain cashflow positive and ‘bankable’!!January 2013 CALUM ROSS MORTGAGE 17

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