Renovation slowdown to hit brokers

by |

There's yet more indication that brokers should brace for further slowdown in refis, with a new CMHC report identifying a weakening renovation sector across much of the country.

"Almost $21 billion was spent on renovations in 2011 across the 10 major centres surveyed, a decrease from 22.8 billion in 2010" said Mathieu Laberge, the CMHC’s deputy chief economist. "As well, when Canadian homeowners were asked about their renovation plans for this year, 38 per cent indicated that they intend to spend $1,000 or more by the end of 2012.”

The pace of renovation is considerably slower than in 2010 when 42 per cent of respondents, drawn from 10 major centres, indicated that they had or would make a similar investment in their homes.

 The figures follow release of the Annual BMO Home Renovation Report last month, suggesting fewer Canadians are planning home renovations this year, with only 51 per cent prepared to take on that work in the next 12 months. That`s down from the 62 per cent who were renovation-ready in 2011.  

The change of plans is likely a reflection of more stringent refinancing rules ushered in by the federal government early last year. They reduce just how much equity a borrower can take out of a home.

More such changes are on the way, specifically around HELOCs, with OSFI announcing Wednesday that it will lower the maximum loan to value on those revolving lines of credit to 65 per cent as a guideline for all federally-regulated lenders.

The sum total of those moves is likely to be the further retrenchment of consumers, unwilling or unable to undertake renovations. It means the classic renovation refi may be harder for brokers to come by this year.

The development may put an end to what has been a very brief upswing in HELOC-related broker originations.

Last fall, MortgageBrokerNews.ca reported that brokers in key markets were benefiting from the record number of Canadians renovating their homes rather than placing those properties on an increasingly slow yet price-stable market.

“Yes, we see a lot of clients coming in with plans to do upgrades and other renovations,” Leslie Penney, VP of business development at APlus Mortgage Group, told MortgageBrokerNews.ca . “I would easily say that two out of every three HELOCs is done for renovation purposes because it gives the client more flexibility – it’s not a one-time shot like a refinance. I’ve found that it’s more common with investor clients who have multiple properties and will use a HELOC on one property to do the renovations on several, or clients who plan on undertaking major renovations.”

  • E T on 2012-06-08 5:01:53 AM

    Well, check again, as it is not low in this province of Saskatchewan. Listen to the news media, where our Premier just took a trip accross to Ireland with many of our contractors/builders of sorts went along and hired professionals in the industry for our construction jobs.

  • E T on 2012-06-08 5:05:41 AM

    Slowdown, here in Saskatchewan? Listen to the news media. Our Premier travelled to Ireland with a few of our contracting firms to hire these professionals on the spot for our booming economy. So, please don't put our Brokers in the same category as others out in the larger centres that are in a slow down. We rock!

  • Ronnie Kartman-The Aston Whitehall Renovation Co-o on 2012-06-08 8:56:53 AM

    Which is exactly why the CMHC Refinance-Plus Improvement Mortgage remains the best (and possibly only) remaining avenue for existing homeowners seeking a renovation-based refis. By utilizing 85% of the home's FUTURE VALUE (post-renovations), plus the fact that the rate on the renovation portion is exactly the same as the mortgage, this is by far the best deal for brokers and their clients since sliced Oreos! Unfortunately, many of you avoid this because it is a bit complicated...(I happen to presonally like complicated). I will be happy to offer suggestions to anyone of you with no strings attached. I would just like to help stop the "belly-aching" and point out this incredible opportunity that has actually been around for years.

    Ronnie Kartman

  • Doug Boswell on 2012-06-09 1:27:25 AM

    This report also had positive news regarding home renovations. In the 10 major centres surveyed, the average renovation amount increased from $12972 in 2010 to $13709 in 2011. More people were paying for these in part from their savings for these from their savings - 74% in 2010 to 81% in 2011. In 2011 68% paid for their renovations entirely from savings. These stats are good news for the industries that supply these goods and services.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions