Mortgage originations in British Columbia fell 26.5% in the third quarter of 2018 compared to the same period a year earlier.
“Almost all provinces saw declines in mortgage origination volumes from the previous year,” read a report from TransUnion Canada. “British Columbia led all provinces with a drop in origination volumes of 26.6% from the previous year, which was likely a result of the national mortgage rules but also the additional measures adopted last year by the B.C. and municipal governments that were intended to provide stability to the housing market and control some of the speculation that had previously driven up home prices.”
In spite of year-over-year delinquency rates dropping to 0.45% during Q4 2018, the mortgage origination environment was challenging nationally. Originations in Q3 2018 dropped 12.9% over the same quarter a year earlier.
“This drop was more severe than the 3% decline the year prior from Q3 2016 to Q3 2017,” read the report. “According to the Bank of Canada, the policy interest rate increased by 75 basis points between Q4 2017 and Q4 2018.
“New mortgage average origination balances also declined to $280,700 in Q3 2018, a decrease of 3.6% from the same time the prior year. The decline spanned all risk tiers, with subprime and near prime tiers falling 6.4% and 6.9%, respectively, which may reflect impacts of the new rules as many consumers will qualify for lower mortgage amounts. Subprime consumers have TransUnion CreditVision risk scores below 600, and near prime consumer scores are 600-699.”
According to the report, consumer delinquency is also directly tied to regional volatility. In Alberta, serious consumer delinquencies rose commensurately with the oil and gas sector’s plummet—as it also did, albeit a shade worse, in Saskatchewan.
“Those economies kind of go as oil prices go, and as we see oil prices drop that leads to lower production and unemployment, as well as delinquencies, tick up,” said Matt Fabian, TransUnion’s director of financial services, research and consulting. “Oil prices rose after the oil patch crisis of 2014, but they’ve tapered off again as supply has diminished and distribution issues persist through the provinces. What we’ve seen is increases in serious delinquency rates. In Alberta, it’s 6.4%; in Saskatchewan it’s 6.5%.”