First National Financial LP

Residential Market Commentary - New factors affecting mortgages

  • First National Financial LP

As we put the federal election behind us and keep a watchful eye on interest rates there are some other factors that could influence housing and mortgages.  In a recent webinar presented by Mortgage Professionals Canada, analyst Ben Rabidoux shared his thoughts on what those factors could be.

With the new federal government settling into its job, it has a tricky balancing act to perform.  Ottawa will have to try to deliver on election promises to improve housing affordability without disrupting the overall economy.

Rabidoux believes the government will focus on increasing the housing supply.  Along with getting more homes built, this could include new rules on the purchase of secondary properties: higher down payment requirements, restricting forms of down payments (limiting the financing of an existing property to purchase a second one) and stricter debt-to-income limits.

A more immediate concern is inflation or, what Rabidoux refers to as, an “inflation scare”.  He cites a recent survey by the Canadian Federation of Independent Business that suggests the percentage of businesses anticipating price increases of more than 5% this year has nearly doubled, from 24% to 45%.

Persistently high inflation would eventually push up the yields on 5-year bonds which, in turn, would cause an increase in fixed mortgage rates.

Of course, COVID-19 continues to play a huge role and the progress of the pandemic will be the single, most significant influence on the market for the foreseeable future.