On behalf of all First National advisors across Canada, it’s my pleasure to wish you a happy, healthy and productive new year.
Starting fresh is a great thing and the way we do that in our business is to gather our team together every January to identify ways in which we can add value to you as suppliers of capital and purveyors of creative financing strategies.
This year, Montebello, Québec plays host to our national conference through January 12th. With the working theme “Better Lending,” I am confident we will emerge from our conference with new ideas that we can use to deliver on our pledge to always strive for better.
This year we start with some positive news. CMHC has substantially cleared its application backlog and First National is now funding a record number of successful submissions. In my years in the industry, I have rarely seen as much capital flow to our clients, and I thank our dedicated funding team for making this possible.
If you are planning a CMHC submission in 2024 with First National’s help, there is additional good news: we can now look forward to a normal cadence of national housing agency reviews.
Another positive is that public policymakers in Canada have finally become more aware of, and sympathetic to, the urgent need to support the development of more housing for our growing population. We can debate whether these initiatives are enough, but the federal government’s removal of GST on the construction of purpose-built rentals and the elimination of sales taxes by many provinces are all steps in the right direction for the multi-family housing sector.
The CMB lives
A stable, long-term funding market is essential to the creation of new multi-family housing supply and on this topic, the news is also good. The government has increased the annual cap on the Canada Mortgage Bond program by $20 billion annually (to $60 billion) and assured us that the CMB will remain a fixture in the marketplace. You may recall that there was some doubt about the future of the CMB. However, after consulting market participants this past summer – including First National – the government has endorsed the program, giving us full confidence that there will be sufficient, reliable CMB issuances available to meet demand for CMHC-insured mortgages going forward.
Bond yields and the potential for rate cuts
Adding to all of this is the late-year rally in the bond market, which caused yields to decline – a positive for long-term rates. This is the bond market’s reaction to recent economic weakness, slowing inflation, and the potential for a central bank rate cut perhaps as early as this spring.
At this point, such a rate-cut scenario is purely speculative, but we do appear to be inching closer to the Bank of Canada’s stated monetary policy objective of bringing inflation down to 2% on a sustained basis.
Some mindful advice
By nature, we are optimists at First National, which is why I opened this year’s message to you with some good news. But we are also realists, which is why the advice and financing strategies we offer are pragmatic and informed by a deep understanding of current and long-term market risks, trends and opportunities.
As we enter 2024, the risks are clear. Interest rates are still high and may not come down as quickly or significantly as any of us would like. Unemployment appears to be on the rise, which could signal trouble ahead across the economy.
Being mindful of these challenges, the best advice I can offer is to:
- Work together with First National to alleviate pressure. By looking at your capital structure in a holistic way, our advisors can identify future pressure points – for example loan maturity schedules – and develop financing strategies to proactively remove barriers to business success.
- Consider a full range of financing solutions. There are times when bridge and mezzanine financing, as well as second mortgages are both necessary and valuable parts of a well-conceived strategy. It’s why your First National advisor is empowered to assess and, if fit for purpose, offer the market’s broadest variety of mortgage types – conventional and insured – for short and long-term purposes.
- Remember the value of interest-rate hedging. The bond market moves quickly and can work against you if you leave yourself unhedged. For your own peace of mind, ask your First National advisor about our early rate lock programs. There is a cost to hedge but the peace-of-mind value alone is well worth it.
- Plan earlier than ever. Whether you are refinancing, renewing or contemplating a new loan, share your vision with us well in advance to ensure the right funds are available at the right time and on the right terms.
I’ve had the pleasure of speaking with many clients operating in many different parts of Canada over the past couple of months. I would say the general sentiment is beginning to turn from caution to cautious optimism. We will be watching the market for further evidence of improvement as the year unfolds.
As it does, you have our unwavering commitment to delivering the advice, strategies, capital and service that will move your business forward. With you, we look forward to doing more in 2024.
Executive Vice President, Commercial Mortgages