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2020 Mortgage Forecasts 

Jackson Middleton • May 05, 2020

Defaults to Jump, Originations to Tumble, Sales to “Suffer”

There’s no doubt that Canada’s mortgage and real estate industries will suffer in the short term due to the impacts of the coronavirus pandemic. But how long will the pain last and how far out might the recovery be?

Those are questions being asked by many in the industry, and some have put forth their best guesses. Here’s a look at the latest mortgage-related forecasts for the remainder of 2020 and into 2021…

Mortgage Arrears to Rise in 2021?

So long as mortgage deferrals and government income assistance remain in place, no major increases are expected in Canadian mortgage arrears in the short term.

Once mortgage deferrals expire and fiscal stimulus supporting households starts to run out, the arrears rate could jump as much as 50%, peaking by Q1 2021, according to some forecasts.

“Assuming government support tapers off in 2021, and based on the historical relationship between employment and mortgage arrears, we see potential for the mortgage arrears rate to average ~35 bps in 2021 vs. 24 bps currently (as of October 2019),” according to TD.

RBC Capital Markets reached the same conclusion, saying, “…It is unlikely that we will see a material increase in delinquency rates until mortgage deferrals expire.”

By comparison, mortgage arrears reached a peak of 0.45% during the financial crisis of 2007-08—still well below the delinquency rate of 11%+ seen in the U.S. during the financial crisis, however.

But some say signs of strain are already starting to appear in certain credit segments.

“There’s early tentative credit card data coming in from credit card trust portfolios. And as expected, the arrears rates are starting to rise [and] the loss rates are starting to move up,” Ben Rabidoux, president at North Cove Advisors, told yahoo! Finance.

Mortgage Originations to Slump

The mortgage industry as a whole is expected to face some strong headwinds “over the near-term as employment trends weaken, credit loss provisioning moves higher, and housing / mortgage activity pulls back materially,” TD noted in a report.

New mortgage originations could fall by as much as 35-40% in the second and third quarters of 2020, TD said, with a recovery taking hold by the fall.

On the positive side, “mortgage spreads have widened out and deposit costs have come down, suggesting funding conditions and liquidity has improved for the mortgage lenders,” TD noted.

Home Sales, Prices to Suffer Short Term Pain


Canadian real estate is currently in a “deep freeze,” with both buyers and sellers having moved to the sidelines to wait out the uncertainty of the ongoing pandemic, according to TD Economics.

“In light of the pandemic, we envision Canadian home sales remaining below their pre-virus level for the remainder of the year. Sales are poised to plunge at a historic pace in April, while gradually recovering their lost steps in subsequent months as buyers remain cautious,” notes economist Rishi Sondhi, adding that this forecast assumes a gradual re-opening of economies throughout the month of May.

“Under these assumptions, Canadian home prices suffer an outsized decline in the second quarter. After which, national average home price growth should proceed at a positive, but subdued pace for the remainder of the year.”

This forecast is similar to others we’ve reported on previously , which anticipate modest price declines in the short term before returning once again to positive growth.

Capital Economics economist Stephen Brown forecasts a 5% decline in prices in the coming months, while RBC Economics’ Robert Hogue expects Canada’s composite benchmark prices to fall briefly over the second half of 2020 by an average of 2.9% year-over-year.

Moody’s, on the other hand, is forecasting a 10% decline in home prices from their peak.

This article was written by Steve Huebl and originally published on the Canadian Mortgage Trendson May 5th 2020.

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RRSP As A Downpayment

By DLC Canadian Mortgage Experts • 28 Dec, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • 21 Dec, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
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