Data from the Bank of Canada indicated that national residential mortgage growth has fallen to a 17-year low in December 2018, which posted a mere 3.1% annual increase to reach $1.55 trillion.
Banks have noted that this might well be just the beginning, predicting that domestic mortgage growth will hover in the low to mid-single digits in 2019. The Canadian economy has previously been expected to slow down to just 1.9% growth this year.
“The bread-and-butter of profitability for Canadian banks — is going to have a little less butter on the bread,” Edward Jones & Co. investment strategist Craig Fehr told Bloomberg. “That is, in many cases, the largest and most profitable and steady of the businesses that these banks operate.”
Teri Currie of Toronto-Dominion Bank said that residential secured lending, which also covers amortizing home-equity credit lines and mortgages, will see “mid-single digit” growth this year.
“In today’s context it’s sending a strong statement that the investments that we’ve made are going to pay off in relatively good growth,” Currie said in late January.
Read more: RBC CEO vows improved performance on its mortgage side
On the other hand, David Baskin of Baskin Wealth Management argued that banks should begin looking at wealth management as the more stable long-term venture.
“I’m not looking for the banks to grow their mortgage business,” Baskin stated. “I don’t think that’s where the juice is.”
Tougher mortgage underwriting regulations have played a large part in decelerating national home sales activity over the past year, with Toronto and Vancouver seeing their slowest year for sales in at least a decade.
“This is not something that’s just spontaneously happening: This is an engineered slowdown with the banks being willing participants in some of these changes that have been made,” CIBC Capital Markets analyst Robert Sedran explained. “It makes for a healthier lending environment and a healthier housing environment for the longer term.”