My Mortgage Blog

Calgary Real Estate Market

So what can we expect from the Calgary Real  Estate market this fall?

Recovery is slow, but we knew it would be. The good news is that all indicators continue to point that the market continues to move towards balance. Sales are up again for July and new listings and inventory continue to decrease. If this trend continues, we will start to see prices stabilize.

It would be nice to see things turn around and get back to "normal" quickly, but we didn't get here overnight, so the trip back is likely to take just as long. I think this is where we insert a line that talks about patience and virtue.

Interest Rates

There's a lot of good news around rates, if you're a borrower.

First, the qualification rate (ie. the Bank of Canada Benchmark rate) dropped in mid-July, from 5.34% to 5.19%. Making it just that little bit easier for qualify and giving the average homebuyer, about 2% more in borrowing capacity. It's not a lot, but we'll take it!

Second, we've seen rates continue to decrease. The bond market rallied briefly in early July, but could not sustain the gains it made. This week we're seeing the Canada 5-Year Bond yield at it's lowest level since January 2017. This week we're likely seeing the fall out of last week's US Federal Reserve policy rate drop - their first rate cut since December 2008.

Finally, the Bank of Canada left the overnight rate unchanged in early July - currently at 1.75%. Up until the most recent announcement, the Bank of Canada continued to purport that this current economic downturn is a "blip" not a trend. In July, they changed their tune slightly, pointing to persistent trade issues nationally and economic slowing, globally, as their reason for caution as we move into the fall.

Put together, this means that we can expect to see these low rates continue and perhaps drop even further in the near term. While this isn't great news for the Canadian economy, those who are looking to buy in the near term can expect some great rates compared to nine months ago.

Consumer Debt

I'm sure you've heard, and continue to hear, news headlines about mounting consumer debt. Last week Quebec took aim at consumer debt and it will be interesting to see if other provinces follow suit.

Quebecers must now pay a minimum of 2% of their balance each month, not just the interest they owe. The minimum payment will increase to 2.5% in 2020 and 5% by 2025. For all new credit card agreements, the 5% minimum payment is already in effect.

This is going to be a double edged sword. For some, this may change spending habits. For others, this could mean increased financial hardship. While I've always been a proponent of rule changes affecting consumer debt, versus mortgages, this period of transition is going to be rocky. We are likely to see increased insolvency rates as those who don't have the cashflow, look for alternatives.

Lana Gilbertson, a licensed insolvency trustee and senior vice-president of MNP Ltd., was quoted in this Global News article as saying: "While boosting minimum payments could help some consumers pay down their debts faster, Quebec’s policy might exacerbate the hardship for those just scraping by."

Consumer debt is provincially regulated, so the Canadian government can't make these changes for all Canadians. Again, while I understand the changes will be hard for many, I do believe that this move brings the issue of consumer debt to the forefront.

For some additional reading on consumer debt, if you're interested, check out Manulife Bank's recent survey results.

Here are some of the highlights:

  • Despite debt challenges, saving for a vacation (34%) led the list of financial priorities (slightly ahead of retirement savings at 31%)
  • Although results revealed that more Canadians believe they have reduced their debt vs. last year’s survey, there are still a significant number (nearly 40%) who live beyond their means
  • 1:4 indebted Canadians admit to making poor progress on paying down their debt
  • 19% say they are unable to break the debt habit
  • 48% of Canadians carry credit card debt
  • 2:3 participants think it's somewhat likely we could experience a recession within the next year

Also, did you know that the perception between good and bad financial habits varies based on age. These results are a great read if you want to understand how different generations of Canadians view spending and debt.