A June report from Edge Realty Analytics discusses the significant psychological impact of mortgage rates breaking above or below key “round” numbers. For instance, while the difference between 4.99% and 5.09% is minimal in terms of affordability, a rate in the 4% range feels considerably more appealing to potential borrowers than one that is in the 5% range. This sentiment is crucial as, in May, insured mortgage rates for some lenders fell below the 5% threshold, with uninsured rates following suit in June.
Mortgage yields have been on a notable decline this month, pushing discretionary uninsured 5-year fixed rates below that critical 5% mark at some of the Big Six banks. Technical analysis suggests that this downward trend has more room to continue, possibly nearing the 2024 low. If yields reach this level, it could result in a further decrease of over 15 basis points for 5-year fixed rates, based on long-term spreads over 5-year Government of Canada bonds and 4-year swaps.
Given rates dipping below a crucial psychological threshold and consumer sentiment improving, it is reasonable to anticipate heightened activity among potential buyers in the coming months. According to MortgageLogic.news, deeply discounted rates are now available.
Mortgage Originations Increase in April
In April, mortgage originations saw a 29% increase compared to the previous year, although this rise is from the historically low levels seen in 2023. This marks the strongest year-over-year performance since early 2021.
The Edge Realty Analytics report indicates that new loans are predominantly in the three- to four-year fixed-rate terms, accounting for over half of all originations, with three-year loans making up the vast majority of these.
It goes on to report that, although variable-rate originations rose by 50% year-over-year, they still accounted for only 9% of total originations in April, and were 90% lower than was reported in the same month in 2022, contradicting some reports of surges in variable-rate preferences. However, the report does anticipate a significant increase in variable-rate originations in the next few months, especially if the Bank of Canada continues with a substantial rate-cutting cycle.
Source: Edge Realty Analytics
National Mortgage Credit Growth
Despite a relatively strong performance in originations in April, national mortgage credit growth was only 3.4% year-over-year, the lowest in the past 24 years. This growth rate is less than half of the 7.1% year-over-year increase in household disposable income in Q1.
As part of its response to Canada’s ongoing housing challenges, the federal government has added another 12 new properties to the Canada Public Land Bank,...
As part of its response to Canada’s ongoing housing challenges, the federal government has added another 12 new properties to the Canada Public Land Bank,...
