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CIBC says mortgage growth cut in half
Canadian consumers are scaling back spending and becoming especially cautious about credit cards and home mortgages this year as the recession wears into their pocketbooks. A report by CIBC World Markets says growth in the mortgage market has slowed to roughly half the pace of six months ago, while non-mortgage consumer credit is also showing weaker growth.
"The slowing will accelerate over the next few months," said CIBC economist Benjamin Tal. "You will see less spending and more savings."
The outlook suggests Canada's mortgage market is starting to slow with the drop in home prices. Falling home prices could mean the next year will see either very limited or no growth in the mortgage market.
Outstanding mortgage credit is rising by half a per cent a month, compared with 0.9 per cent a month advance in mid-2008, CIBC said.
CIBC says that means the industry will have to generate about $55 billion in new mortgages just to compensate for the ones reaching maturity, however Tal predicted consumers will return to the market, partly because of attractive deals offered by lenders.
"Although you won't see it this year, maybe in 2010 you will see a nice recovery. Affordability is much better than it was in '91 and '82 because interest rates are at a record low," he said.
The CIBC report also suggests that while consumer credit is still strong - rising nine per cent last year as compared to a year earlier - the signs of tighter spending are more apparent when comparing each month to the next.
Outstanding consumer credit rose by 0.6 per cent a month, compared with 0.8 per cent a month in mid-2008. Tal expects consumer debt to rise by three or four per cent over the next year - down from 14 per cent over last year.
"Even after we recover, in 2010 or 2011, we will not go back to the days of consumer debt rising," he said. "We believe there is a permanent softness in consumer spending reflecting the fact that people will start saving again."
However, a new Royal Bank survey suggests that Canadians are starting to become hopeful, and even contemplating buying a home.
The survey, conducted in January, found that 65 per cent of the people polled thought it was a buyer's market, while another 27 per cent of those who responded planned to buy a home within the next two years.
The four-point increase is the biggest uptick recorded by the annual RBC home-buying intentions survey since 2001.
The predictions could be overly optimistic, suggests economist Doug Porter at the Bank of Montreal.
He says the findings doesn't necessarily mean the prospective buyers are going to actually enter the market "given the wave of gloomy economic news we've seen in recent months."
"We've seen the housing market shift very abruptly from an outright seller's market a year ago, to an outright buyer's market now," he said.
March 5, 2009 in Arranging Mortgage Financing | Permalink
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Great Post. Thanks for sharing.
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Posted by: Prince Of Wales Condos | Aug 15, 2012 11:04:09 AM
The new mortgage reforms will definitely have a significant impact on the housing market because many prospective homeowners will not be able to meet the stringent income to mortgage payment ratio of 28% and heftier down payments. As a result we will see more renters.
Posted by: Gmac Mortgage | Aug 16, 2011 1:54:00 PM
The new mortgage reforms will definitely have a significant impact on the housing market because many prospective homeowners will not be able to meet the stringent income to mortgage payment ratio of 28% and heftier down payments. As a result we will see more renters.
Posted by: Gmac Mortgage | Aug 16, 2011 1:53:18 PM
Great information shared for the year 2009, but do let us know about the 2011 too. Eager to know more....
Posted by: Jeff Morris (Real Estate Agent) | Aug 1, 2011 4:57:27 PM
Its a nice Blog i must tell ya...
Posted by: Mortgages | Feb 24, 2010 6:21:55 AM
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