Foreign demand for Canadian mortgages good for homebuyers and brokers
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18/11/2010 6:00:00 PM
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Canadian homebuyers are benefiting from concern that European governments can’t finance budget gaps.
Canada Housing Trust, the financing arm of CMHC, sold $2.15 billion in 3.35 percent bonds maturing in December 2020, as well as a $2 billion of five-year floating-rate notes, at the lowest cost since February on increased demand for the country’s securities. The fixed-rate debt was priced to yield 34 basis points more than comparable Canada government bonds, the narrowest gap since the housing agency began selling 10-year bonds 21 months ago.
Canada Housing is benefiting from international confidence in the country’s economy and investors’ reluctance to seek refuge in U.S. bonds.
Dave Larock, a mortgage planner with TMG in Toronto sees this development as a win-win situation.
“The fact that our mortgages were so enthusiastically bought shows that Canadian mortgages are seen as being a safe asset and strong demand is good for our interest rates,” he told CMP.
CMHC, through Canada Housing Trust, provides financing for banks and other mortgage sellers, to lower their costs and promote competition. Canada Housing Trust began selling bonds in 2001, and has about $189.5 billion of debt outstanding, including $171 billion in fixed-rate bonds and $18.5 billion of floating-rate notes.
As for recent hikes of a quarter-percentage point for five-year fixed rates by some banks, Larock believes it is a temporary phenomenon. “Banks are always looking for the first opportunity to raise rates and I think we will recover that ground before any more increases occur.”
- John Tenpenny, Editor, CMP