class=article-title data-tb-title id=articleTitle>Mortgage and real estate industry hit the jackpot with this trio of announcements
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They say good news comes in threes. I don't know if that's true or if it's from the same school of science as astrology, but it happened this week with mortgages.
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First, Ottawa announced a bombshell loosening of mortgage insurance rules. Second, inflation stunned economists by undershooting the two per cent target. Third, the United States Federal Reserve threw a party for the markets with a jumbo rate cut.
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All of the above went down in the short span of 75 hours.
Here's a quick peek at how this trifecta of bullishness could awaken Canada's real estate market.
Mortgage insurance easing
Out of nowhere, the government decided that Canada's default insurance market needed stimulation. Starting December 15, for those seeking insured mortgages, the government will allow:
A 50 per cent increase in the maximum allowable home value (i.e., $1.5 million instead of the $1 million it's been stuck at since 2012)
30-year amortizations for buyers of new builds
30-year amortizations for all first-time buyers
The first measure corrects the fact that value limits on insured homes haven't kept up with the 76 per cent surge in home values since the rule was instituted.
The second measure creates a more liquid pool of buyers for new homes, incentivizing the construction Canada desperately needs.
The third change levels the playing field for first-time buyers who don't have down payment assistance from their families.
All of these initiatives help put young voters into homes sooner. But far be it from me to be cynical and assume that desperately clinging to power by wooing disenfranchised homebuyers was in the government's playbook. I'm sure it was just a fluke that every housing policymaker I've ever spoken to in the years leading up to this move was staunchly against such measures for fear of creating further imbalance in the housing market.
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In any case, while one can debate the pros and cons of these policies, what's undeniable is that the mortgage and real estate industry just hit the jackpot.
Lenders relying on insured securitization to fund prime mortgages are especially grinning, including publicly traded companies First National Financial (TSX: FN) and MCAN Financial (TSX: MKP).
Surprise below-target inflation
For months on end, the Bank of Canada has predicted that inflation would reach the two per cent target in late 2025. But on Tuesday, inflation unexpectedly slowed to just 1.95 per cent. That's more than three quarters ahead of schedule.
Suddenly, the Bank of Canada has more leeway to cut rates without fear of re-invigorating inflation. And that's precisely what it'll do, with markets pricing in 200 basis points of rate cuts within 24 months, according to forward rate data from CanDeal DNA.
Such a drop would drastically slash payments, increasing the appeal of home buying relative to renting. It would also trim borrower's debt-to-income ratios, making mortgage qualifying significantly easier. The resulting additional demand could mop up much of the inventory that's piled up since 2022.
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The Fed's mega rate cut
Nine out of 10 economists expected the U.S. Federal Reserve to trim rates just 25 bps on Wednesday. Despite the U.S. economy being in "good shape" (the Fed's words), the central bank instead decided on a supersized 50 bps cut. Clearly, U.S. policymakers worry the economy is more fragile than advertised.
A 50-basis-pointer theoretically lets the Bank of Canada cut more as well, since it doesn't have to worry about a widening U.S.-Canada rate differential tanking our currency. And both the Bank of Canada and the Fed will expedite rate cuts if they see unemployment accelerate, which I'd put at a better-than-even chance.
Real estate stimulus
Many of us in the housing analysis business thought falling rates would perk up real estate more than they have. But most wanna-be borrowers either can't pass the government's stress test or can't rustle up the minimum down payment.
Moreover, history shows that the early days of rate cuts often fail to spark homebuying. It takes time for incomes to catch up, affordability to return, immigration to add demand, rising unemployment to simmer down, and so on.
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This week's trio of bullish mortgage events should give real estate a shot in the arm by the first quarter or before. As with all policy loosening, though, some buyers will try to jump the gun and beat the crowd — like racing to the buffet before it opens.
Adding to demand is slowly improving affordability. Real estate has been correcting sideways for two years. Lower prices and rising incomes have been quietly working magic behind the scenes. For instance, the typical home is now just 4.2 times gross income for dual-income households earning average weekly wages. That's down from a nosebleed 5.9 in February 2022.
Recommended from Editorial
The best mortgage rates in Canada right now
Mortgage rates are falling fast and there's much more relief to come
Can home values go down before they go up? Theoretically, sure, but the lower prices go, the more opportunity buyers will have when values rebound. The gifts that the real estate market got this week will keep on giving throughout 2025.
If you beloved this short article and you would like to obtain extra information pertaining to furniture placement kindly take a look at the page. Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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Want to know more about the mortgage market? Read Robert McLister's new weekly column in the Financial Post for the latest trends and details on financing opportunities you won't want to miss.
Bookmark our website and support our journalism: Don't miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.
Mortgage rates
The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news. Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.
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Mortgage and real estate industry hit the jackpot with this trio of announcements Back to video
We apologize, but this video has failed to load.
Try refreshing your browser, or
tap here to see other videos from our team.
Play Video
First, Ottawa announced a bombshell loosening of mortgage insurance rules. Second, inflation stunned economists by undershooting the two per cent target. Third, the United States Federal Reserve threw a party for the markets with a jumbo rate cut.
Advertisement 2
Story continues below
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THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Subscribe now to read the latest news in your city and across Canada.
Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.
Daily content from Financial Times, the world's leading global business publication.
Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
Daily puzzles, including the New York Times Crossword.
SUBSCRIBE TO UNLOCK MORE ARTICLES
Subscribe now to read the latest news in your city and across Canada.
Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.
Daily content from Financial Times, the world's leading global business publication.
Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
Daily puzzles, including the New York Times Crossword.
REGISTER / SIGN IN TO UNLOCK MORE ARTICLES
Create an account or sign in to continue with your reading experience.
Access articles from across Canada with one account.
Share your thoughts and join the conversation in the comments.
Enjoy additional articles per month.
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Sign In or Create an Account
Email Address
Continue
or
View more offers
If you are a Home delivery print subscriber, unlimited online access is included in your subscription. Activate your Online Access Now
Article content
All of the above went down in the short span of 75 hours.
Here's a quick peek at how this trifecta of bullishness could awaken Canada's real estate market.
Mortgage insurance easing
Out of nowhere, the government decided that Canada's default insurance market needed stimulation. Starting December 15, for those seeking insured mortgages, the government will allow:
A 50 per cent increase in the maximum allowable home value (i.e., $1.5 million instead of the $1 million it's been stuck at since 2012)
30-year amortizations for buyers of new builds
30-year amortizations for all first-time buyers
The first measure corrects the fact that value limits on insured homes haven't kept up with the 76 per cent surge in home values since the rule was instituted.
The second measure creates a more liquid pool of buyers for new homes, incentivizing the construction Canada desperately needs.
The third change levels the playing field for first-time buyers who don't have down payment assistance from their families.
All of these initiatives help put young voters into homes sooner. But far be it from me to be cynical and assume that desperately clinging to power by wooing disenfranchised homebuyers was in the government's playbook. I'm sure it was just a fluke that every housing policymaker I've ever spoken to in the years leading up to this move was staunchly against such measures for fear of creating further imbalance in the housing market.
Top Stories
Get the latest headlines, breaking news and columns.
There was an error, please provide a valid email address.
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Thanks for signing up!
A welcome email is on its way. If you don't see it, please check your junk folder.
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Article content
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In any case, while one can debate the pros and cons of these policies, what's undeniable is that the mortgage and real estate industry just hit the jackpot.
Lenders relying on insured securitization to fund prime mortgages are especially grinning, including publicly traded companies First National Financial (TSX: FN) and MCAN Financial (TSX: MKP).
Surprise below-target inflation
For months on end, the Bank of Canada has predicted that inflation would reach the two per cent target in late 2025. But on Tuesday, inflation unexpectedly slowed to just 1.95 per cent. That's more than three quarters ahead of schedule.
Suddenly, the Bank of Canada has more leeway to cut rates without fear of re-invigorating inflation. And that's precisely what it'll do, with markets pricing in 200 basis points of rate cuts within 24 months, according to forward rate data from CanDeal DNA.
Such a drop would drastically slash payments, increasing the appeal of home buying relative to renting. It would also trim borrower's debt-to-income ratios, making mortgage qualifying significantly easier. The resulting additional demand could mop up much of the inventory that's piled up since 2022.
Advertisement 4
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
The Fed's mega rate cut
Nine out of 10 economists expected the U.S. Federal Reserve to trim rates just 25 bps on Wednesday. Despite the U.S. economy being in "good shape" (the Fed's words), the central bank instead decided on a supersized 50 bps cut. Clearly, U.S. policymakers worry the economy is more fragile than advertised.
A 50-basis-pointer theoretically lets the Bank of Canada cut more as well, since it doesn't have to worry about a widening U.S.-Canada rate differential tanking our currency. And both the Bank of Canada and the Fed will expedite rate cuts if they see unemployment accelerate, which I'd put at a better-than-even chance.
Real estate stimulus
Many of us in the housing analysis business thought falling rates would perk up real estate more than they have. But most wanna-be borrowers either can't pass the government's stress test or can't rustle up the minimum down payment.
Moreover, history shows that the early days of rate cuts often fail to spark homebuying. It takes time for incomes to catch up, affordability to return, immigration to add demand, rising unemployment to simmer down, and so on.
Advertisement 5
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
This week's trio of bullish mortgage events should give real estate a shot in the arm by the first quarter or before. As with all policy loosening, though, some buyers will try to jump the gun and beat the crowd — like racing to the buffet before it opens.
Adding to demand is slowly improving affordability. Real estate has been correcting sideways for two years. Lower prices and rising incomes have been quietly working magic behind the scenes. For instance, the typical home is now just 4.2 times gross income for dual-income households earning average weekly wages. That's down from a nosebleed 5.9 in February 2022.
Recommended from Editorial
The best mortgage rates in Canada right now
Mortgage rates are falling fast and there's much more relief to come
Can home values go down before they go up? Theoretically, sure, but the lower prices go, the more opportunity buyers will have when values rebound. The gifts that the real estate market got this week will keep on giving throughout 2025.
If you beloved this short article and you would like to obtain extra information pertaining to furniture placement kindly take a look at the page. Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Advertisement 6
Story continues below
This advertisement has not loaded yet, but your article continues below.
Article content
Want to know more about the mortgage market? Read Robert McLister's new weekly column in the Financial Post for the latest trends and details on financing opportunities you won't want to miss.
Bookmark our website and support our journalism: Don't miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.
Mortgage rates
The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news. Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.
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Share this article in your social network
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