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CMHC Q1 report reveals arrears rate

By Neil Sharma 30 May 2018 MBN

The Canada Mortgage and Housing Corporation released its Q1 report yesterday and revealed a key concern. “Elevated levels of household debt continue to be a key vulnerability,” Lisa Williams, CMHC’s CEO, said in teleconference, adding that net income is down from a year ago.

“It’s largely due to lower net gains on financial instruments, which decreased by $107mln and was driven by weak performances in the equity market in the first quarter of 2018.”

As predicted, Canadians have felt the brunt of regulatory changes in the housing market. The evidence indicates B-20 and rising interest rates have made their presences felt.

“We continue to see the impact of recent regulatory changes on transactional homeowners and portfolio volumes,” said Williams. “Transactional home values decreased 15% from the same period last year, reflecting market adjustments to the regulatory changes that came into effect in 2017. New portfolio volumes also remain low, resulting from an increase in capital requirements. Compared to the same period last year, multi-unit residential volumes decreased by 3% on a unit basis, primarily as a result of lower purchase volumes.”

However, Romy Bowers, CMHC’s CCO, says it’s too early to sift through the data needed to measure B-20’s impact—although she teased that might not be the case when Q2 results are released.

“Lisa mentioned so far this year we’ve seen a 15% decline in transactional homeowner values and that’s our first look at the impact of the regulatory changes, but as we’re heading into the height of the mortgage season it’s a little bit early to know for sure what the true impact is,” said Bowers. “We don’t have a clear idea. When we report our earnings in one quarter’s time, we’ll have more to say about this.”

The CMHC report also showed that insurance claims have decreased by approximately 16%, thanks in part to an improved unemployment rate across the country and significant appreciation to housing values, particularly those in British Columbia.

The arrears rate of 0.29% is consistent with last year’s 0.32%. “In Q1, the average Canadian homebuyer had a credit score of 752 with a purchase price of over $280,000,” said Williams, adding that the average equity was 7.8%.

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