The once-hot real estate market cooled considerably in 2017, and with Guideline B20 on the horizon, all indications are that it will stay that way.
It is expected that first-time homebuyers will bear the brunt of B20 more than anybody else, and according to Sherwood Mortgage Group’s president, that could result in a noticeable decline in market activity.
“It will be isolated to certainly individuals, mostly first-time buyers,” said Anthony Contento. “Will there be a drop? Possibly. I’d anticipate anywhere between five and 10%, but our real estate will continue to surge, interest rates will continue to stay low, and we’ll make up the difference on the majority of the other purchasers out there.”
Ontario’s Fair Housing Plan, introduced in April, slowed down the overactive market, which might have been necessary from a consumer standpoint, but it’s remained inert ever since.
Contento says that, under the circumstances, things could have been worse.
“We didn’t see much increase this year, with the changes that came about in the mortgage industry,” he said. “Given the changes, I’m quite happy with the way we did. Consumer confidence dropped throughout the year, and that was a bit of an indication that we’d have a drop, or flatline, in sales, so I’m pleased with the way we’ve performed. I wouldn’t say I’m ecstatic, but certainly pleased we haven’t lost much.”
Mortgage Edge’s Owner, John Bargis, says they’ve had a strong year, even if conditions have been less than ideal. In particular, he noticed monoline lenders being muscled, however, he believes they’ll show resilience in the face of B20.
“The year was really good,” said Bargis. “There was a redistribution of volume between lenders. We managed to still support our monoline lenders, although there was a noticeable shift in volume to balance sheet lenders. We also saw a more aggressive presence from the credit unions as well.
“There are certainly going to be further challenges. Monolines will be able to retain a good chunk of their business as a result of B20, because of more stringent qualifications for anybody looking for a refinance or a switch in transfer, but they should be able to retain a good bit of their mortgage book.”
Bargis thinks the government is trying to regulate more industries, and while he wouldn’t rule out further intervention into the mortgage industry in the near future, he hopes for more transparent consultations.
“Do I think the government should have consulted more with the industry? Absolutely—that’s where they fell short,” he said. “A lot of rules they’re implementing are certainly favouring the banks, for sure. You can see that in the numbers. Going forward in 2018, there needs to be awareness that strength in lender relationships is critical for the success for any brokerage.”
The banks of mom and dad, however, aren’t getting any regulatory breaks, and Contento thinks they’ll be under even further strain before the year’s over.
“With the changes that are coming about, it looks like there might be a rush until the end of the year with a lot of people anticipating what it might mean for them, given that there are still a lot of first-time buyers in the market and it will probably affect them more than anybody else,” he said. “The bank of mom and dad will probably have to dig deeper into their pockets to help them.”
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