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COVID-19: What It Means for the Canadian Mortgage and Financial Industries

The novel coronavirus, COVID-19, has been creating headlines across Canada, due in large part to the economic impact.

As the Canadian onset develops, so too does the news affecting the Canadian mortgage and financial industries.

Here are some of the top headlines:

1. Bank of Canada Interest Rate

On March 13, 2020, in an emergency decision, the Bank of Canada (BOC) cut interest rates to 0.75%. The interest rate was previously at 1.25%, the rate set on March 4, 2020.

The Bank Rate is correspondingly 1% and the deposit rate is 0.5%.

“This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices,” the BOC stated.

Read more about the interest rate decrease: https://www.bankofcanada.ca/2020/03/bank-of-canada-lowers-overnight-rate-target-to-%C2%BE-percent/

2. Canadian Mortgage Rates Falling

On March 11, 2020, Mortgage Broker News reported that mortgage rates are falling as economic turmoil persists.

“Bond yields, which lead fixed mortgage rates, hit a low of 0.27% for the 5-year note and 0.23% for the 10-year. By comparison, they started the month at 1.07% and 1.12%, respectively,” Mortgage Broker News wrote.

After the March 13, 2020 BOC emergency announcement, it’s possible those rates could be dropping even further.

Read the full Mortgage Broker News article: https://www.canadianmortgagetrends.com/2020/03/latest-in-mortgage-news-mortgage-rates-falling-as-economic-turmoil-persists/

3. Canadian Government Response

Also on March 11, 2020, Prime Minister Justin Trudeau announced a $1-billion-plus spending plan to deal with the COVID-19 virus. This includes $275 million in additional research funding and $500 million in healthcare cash for provinces and territories.

On March 13, 2020, Finance Minister Bill Morneau announced that he would deliver a fiscal stimulus package next week that will include an additional $10 billion in new funding to Canada’s two business financing agencies — the Business Development Bank of Canada and Export Development Canada.

More fiscal steps could be coming, Trudeau said.

4. New Mortgage Buying Program

On March 16, 2020 the Canadian government announced a revised Insured Mortgage Purchase Program (IMPP), which will give $50 billion of insured mortgage pools purchased through the Canada Mortgage and Housing Corporation (CMHC).

“This action will provide stable funding to banks and mortgage lenders in order to ensure continued lending to Canadian consumers and businesses,” the government said in a statement.

According to the Financial Post, a similar program was introduced during the 2008 financial crisis.

“…the idea is to give the big banks funding and liquidity flexibility so they could provide cash and credit to individuals and businesses, as needed, to keep the economy going,” the Financial Post stated.

5. OSFI Supporting the Resilience of Financial Institutions

On March 13, 2020, OSFI (the Office of the Superintendent of Financial Institutions) halted talks on changing its mortgage stress test and eased capital requirements to free up $300 billion (US $215 billion) of lending capacity, as reported by BNN Bloomberg.

OSFI also lowered the Domestic Stability Buffer, effective immediately, to 1.00%.

Read the OSFI announcement here: https://www.osfi-bsif.gc.ca/eng/osfi-bsif/med/Pages/nr_20200313.aspx

6. Rescheduled Events

Many organizations are cancelling or postponing events that were previously planned for March and April 2020.

For instance, the Canadian Mortgage Awards have been postponed to October 30, 2020: https://canadianmortgageawards.com

If you were planning to attend an event in the new few weeks, check with the organizer to verify the new date.

For additional information about COVID-19, please visit the Government of Canada’s website for the most up-to-date travel advice and advisories.

Purview is monitoring the effects of COVID-19 on the Canadian mortgage and financial industries. As always, our property data and risk management tools continue to be fully available online.

Our clients’ health and well-being is our highest priority. We are available over phone or email to answer any questions.

Reach out to us by calling 1-855-787-8439 or visiting https://www.purview.ca/contact-us/.

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