The CEO of one mortgage default insurer believes Alberta is set to see an uptick in mortgage delinquencies and a drop in housing prices in the near future – and the insurer scrutinizing deals more closely.
“Our expectation is we’ll start to see [mortgage delinquencies] potentially in the second half of this year, so third quarter, fourth quarter it will start to pick up,” Stuart Levings, CEO of Genworth
Canada told the Globe and Mail.
In anticipation of this, Genworth has sent a higher number of deals to underwriters to be evaluated, as opposed to relying on a computer algorithm.
As a result, the insurer has rejected around 8.5 per cent of Alberta’s deals, an increase of 1.5 per cent over average underwriting rates.
Levings expects prices to fall 8 to ten per cent in Alberta by the end of the year.
The oil industry – a major contributor to Canada’s economy – has taken a beating, with prices falling 60 per cent at certain points this year. Oil currently sits at $60.40 per barrel.
Genworth’s conservative underwriting has been influenced by the effects the 2008 recession had on the insurer – and the overall housing market – in Alberta.
“Alberta was literally a housing bubble going into 2008,” he told the Globe. “House prices went up 15-20 per cent a year, two to three years in a row. It was unheard of.”
As for unemployment rates, Edmonton reached 5.3 per cent in March; Calgary spiked to 5.2 per cent. Levings believes the overall unemployment rate in Alberta could eventually hit seven per cent.