January 23, 2025 • 13 mins
In this episode, Steve Hamoen welcomes listeners and kicks off with an analysis of the Bank of Canada's latest interest rate announcements and predictions. The discussion explores how these rates affect consumer spending and mortgage dynamics. We then delve into TD Bank's recent mortgage sale and restructuring efforts. The episode highlights trends in Ottawa's housing market and Canada's future housing needs, considering the impact of federal immigration levels. We address challenges developers face in the current market and provide a summary of Canada's evolving housing landscape. The episode concludes with a sponsor message from Real Approved Inc.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the Ontario Mortgage & Real EstateInsights Podcast, your go-to source for the
latest developments, trends, and regulatorychanges in the industry.
I'm your host, Steve Hamoen, here to provideyou with insights sourced from reputable news
outlets to help you stay informed and makewell-informed decisions.
This podcast is brought to you by Real ApprovedInc., a trusted mortgage brokerage dedicated to
(00:23):
helping Canadians achieve their homeownershipdreams.
Visit realapproved.ca to learn more about howtheir experienced team can assist you with your
mortgage needs.
Let's dive into today's episode.
Today, we're focusing on the upcoming interestrate announcement from the Bank of Canada,
which is scheduled for January 29.
(00:45):
Currently, the overnight lending rate stands at3.25 percent, a decrease from five percent a
year ago.
This rate is crucial as it influences theinterest that banks and lenders charge for
loans and mortgages.
So, will there be another rate cut?
According to TD economist James Orlando, thedata suggests a potential cut of 25 basis
(01:07):
points, or a quarter of a percent.
Orlando stated in a recent news release thatgiven the current interest rate environment in
Canada, the Bank of Canada might opt for aslower pace of cuts.
He noted that the bank had previously reducedrates by 50 basis points in both October and
December.
The Bank of Canada's strategy over the pastyear aimed at controlling inflation by raising
(01:29):
the overnight lending rate.
The objective was to bring inflation down totwo percent, which was achieved as higher
interest rates led to reduced consumer spendingon travel, home renovations, and dining out.
Orlando also mentioned that as interest rateshave decreased, consumer spending has picked
up, with more people willing to spend ondining, services, and physical goods.
(01:52):
The latest figures from Statistics Canada showthat the annual inflation rate dropped to 1.8
percent in December, which was lower thananticipated.
Reuters reported that a further decline ininflation could prompt the central bank to cut
rates again next week.
However, Bank of Canada Governor Tiff Macklemindicated last month that any future rate cuts
would be gradual.
(02:14):
A Reuters poll of economists suggests that manyexpect the bank to lower the rate again next
week.
An interesting factor influencing spending isthe federal GST/HST tax break that began on
December 14 and will last until February 14.
This tax break has led to reduced prices onitems such as alcoholic beverages, children's
(02:36):
clothing, toys, video game consoles, andrestaurant meals, particularly in provinces
with the Harmonized Sales Tax.
For Canadians with variable rate mortgages, arate cut means that more of their monthly
payment goes toward the principal, reducing theoverall interest paid over time.
However, for those with fixed rate mortgages, aBank of Canada rate cut does not have an
(02:59):
immediate impact.
If the Bank of Canada decides to hold thelending rate at 3.25 percent, it would mean
little change for the average Canadian.
Orlando believes that the bank may need tostart holding rates steady in the near future,
possibly as soon as the next meeting in March.
He predicts that by the end of 2025, the bankwill have cut the lending rate by a total of
(03:21):
100 basis points, bringing it down to twopercent.
The next interest rate announcement from theBank of Canada is scheduled for March 12.
We'll be keeping a close eye on developmentsand will update you with any significant
changes.
In a significant move, TD Bank is planning tosell approximately $9 billion in residential
(03:43):
mortgages.
This decision comes as the bank seeks to adjustits balance sheet in response to an asset cap
imposed by United States regulators.
The asset cap is part of a settlement agreementfollowing charges of inadequate money
laundering controls.
The portfolio that TD Bank is looking to sellprimarily consists of jumbo mortgages, which
are loans extended to United States homeownerswith strong credit profiles.
(04:06):
According to reports from BNN Bloomberg, bidsfor these loans are expected to be received by
next week.
While a TD spokesperson declined to provideadditional comments to Canadian Mortgage
Trends, they confirmed the accuracy of thedetails reported by BNN Bloomberg.
This development follows a significant event inOctober 2024, when TD Bank agreed to pay over
(04:28):
$3 billion in fines and accepted growthrestrictions in the United States as part of
its settlement.
The Office of the Comptroller of the Currency,the United States regulator overseeing TD Bank,
imposed an asset cap that limits the bank’sability to expand its retail business beyond
its current asset levels.
(04:48):
To comply with this asset cap and maintainoperational flexibility, TD Bank is undertaking
a restructuring of its holdings.
This restructuring includes selling up to $50billion in lower-yielding investment
securities.
The proceeds from these sales will bereinvested to optimize the bank's balance sheet
and meet the regulatory requirements.
(05:09):
The decision to sell such a substantial amountof mortgages is a strategic move by TD Bank to
align with regulatory expectations whileensuring the bank's continued growth and
stability.
It's a reminder of the complex regulatorylandscape that financial institutions must
navigate, particularly when operating acrossinternational borders.
(05:29):
In Ottawa, the housing market has witnessed aremarkable surge, with a 75 percent increase in
new housing sales in 2024 compared to theprevious year.
This significant growth has been primarilyfueled by the demand for multi-family units,
particularly townhouses.
According to a recent report by Zonda Urban,the sale of townhouses skyrocketed, with 1,997
(05:53):
units sold in 2024, marking a 72 percentincrease from the previous year.
The sales momentum for townhouses peaked in thefourth quarter, with 858 new townhouses sold,
reflecting an 84 percent increase from the sameperiod in 2023.
The west and southwest regions of Ottawa,notably Barrhaven and Stittsville, were key
(06:16):
areas driving this demand, accounting for morethan half of all townhouse sales.
Meanwhile, Kanata and Orleans contributed anadditional quarter of the market activity.
Affordability has been a crucial factor in thismarket growth.
Stacked townhouses, which made up nearly halfof the new townhouse inventory, were sold at an
average price of $387,150.
(06:41):
These units offered an average size of 1,066square feet.
In contrast, traditional townhouses, which aremore spacious at 1,801 square feet, were priced
higher, averaging $588,334.
Interestingly, the demand for townhousesoutpaced that for new condominium apartments,
(07:04):
which, despite experiencing a 204 percentyear-over-year increase in sales, remained a
smaller segment of the market.
Only 82 new condominium apartments were sold in2024, leaving 225 units unsold at the year's
end.
Zonda Urban's report attributes part of thisrebound to a strategic shift by developers in
(07:24):
late 2023.
Developers adjusted their pricing and productofferings to focus on more compact and
affordable townhouse options, aligning withbuyer demand.
As Pauline Lierman, Vice President of MarketResearch at Zonda Urban, noted, "Ground-related
townhouses really are the engine of thismarket."
Fourteen new townhouse developments launched in2024, with an impressive 67 percent absorption
(07:49):
rate of released units by the end of the year.
The average price of these newly launchedtownhouses stood at $490,963.
The report anticipates that the strong demandfor townhouses will persist into 2025, driven
by relatively affordable price points and thecontinuing appeal of suburban communities in
Ottawa.
(08:10):
In a recent report by Oxford Economics,Canada's housing needs are projected to
decrease by 500,000 homes by the year 2035.
This significant change is driven by ananticipated decline in the country's
population, as outlined in the research.
The revision to Canada's long-term housingsupply needs is based on a predicted 0.2
(08:32):
percent annual population decrease over thenext two years, largely attributed to recent
changes in immigration policy introduced by thefederal government.
According to Oxford Economics, Canada'spopulation is expected to decline to 41.1
million in 2026 from 41.3 million in 2024.
(08:54):
This marks the first population decrease sinceConfederation in 1867.
As a result, the household formation forecasthas been revised downward from 2.9 million to
2.5 million between now and 2035.
The research paper, authored by economistMichael Davenport and Tony Stillo, Director of
(09:15):
Canada Economics at Oxford, suggests that about500,000 fewer homes will need to be built by
2035 to rebalance the housing market.
In October, the federal government unveiled its2025-2027 Immigration Levels Plan, which lowers
the target for permanent resident admissions tounder 400,000 annually.
(09:37):
This represents a decrease of more than 20percent compared to the previous plan.
The updated plan also aims to reduce the shareof temporary residents to 5 percent of the
population by the end of 2026.
These new targets are expected to lead to anunprecedented net outflow of 445,000 temporary
residents each year over the next two years.
(09:58):
Oxford Economics notes that this markedslowdown in immigration levels is expected to
result in 1 million fewer people living inCanada by 2030 compared to previous estimates.
Not only will this have an impact on housingneeds, but it is also expected to slow GDP
growth in 2025 by 0.1 percentage point to 1.3percent.
(10:20):
The growth rate is anticipated to be an averageof 1.7 percent in 2026 and 2027, which is 0.5
percentage points lower than previouslyexpected.
The report highlights that the weaker growth inconsumption and housing due to a smaller
population will dampen the boost to Canada'seconomy from lower interest rates and stronger
global demand.
(10:41):
However, the reduction in housing needs overthe next decade is expected to help close the
housing supply gap, which has struggled to keeppace with demand in recent years.
Oxford Economics forecasts a less daunting waveof new homebuilding in the coming decade,
projecting housing starts to crest just below300,000 units later this decade, compared to
the 350,000 range in its previous forecast.
(11:05):
With new homebuilding having slowed in thesecond half of 2024, Oxford expects that
activity will likely continue to cool throughthe winter due to the lagged impact of past
interest rate hikes and improving, yetstill-soft, housing demand.
Additionally, escalating building and materialcosts are leading many developers to delay or
cancel new projects, particularly multi-unitdwellings in Toronto and Vancouver.
(11:31):
However, as interest rates continue to decline,building costs stabilize, and government
initiatives to address Canada's chronic housingshortfall take effect, Oxford predicts that
housing starts will gradually increase,positively impacting affordability.
The authors of the report conclude thatstronger growth in housing supply than demand
over the medium term will cause house prices torise at a slower pace than incomes on average.
(11:57):
Despite a smaller population over the next twoyears and slower population growth thereafter,
it is expected to take around a decade torestore housing affordability at the national
level.
This report provides a comprehensive look atthe evolving landscape of Canada's housing
market, influenced by demographic shifts andpolicy changes.
(12:18):
It's essential to consider these factors as wenavigate the future of real estate and housing
in Canada.
Thanks for tuning in to another episode of theOntario Mortgage & Real Estate Insights
Podcast.
We hope you found today's insights valuable asyou navigate the world of mortgages and real
estate.
Before you go, a quick reminder (12:36):
Real Approved is here to make your mortgage journey smoother.
Whether you're buying your first home orrefinancing, their experienced team is ready to
guide you with personalized support every stepof the way.
Visit realapproved.ca to get started and takethe next step toward achieving your
homeownership goals.
(12:57):
Catch you next time, and stay informed with thelatest industry insights!
Welcome to the Ontario Mortgage & Real EstateInsights Podcast, your go-to source for the
latest developments, trends, and regulatorychanges in the industry.
I'm your host, Steve Hamoen, here to provideyou with insights sourced from reputable news
outlets to help you stay informed and makewell-informed decisions.
This podcast is brought to you by Real ApprovedInc., a trusted mortgage brokerage dedicated to
(00:23):
helping Canadians achieve their homeownershipdreams.
Visit realapproved.ca to learn more about howtheir experienced team can assist you with your
mortgage needs.
Let's dive into today's episode.
Today, we're focusing on the upcoming interestrate announcement from the Bank of Canada,
which is scheduled for January 29.
(00:45):
Currently, the overnight lending rate stands at3.25 percent, a decrease from five percent a
year ago.
This rate is crucial as it influences theinterest that banks and lenders charge for
loans and mortgages.
So, will there be another rate cut?
According to TD economist James Orlando, thedata suggests a potential cut of 25 basis
(01:07):
points, or a quarter of a percent.
Orlando stated in a recent news release thatgiven the current interest rate environment in
Canada, the Bank of Canada might opt for aslower pace of cuts.
He noted that the bank had previously reducedrates by 50 basis points in both October and
December.
The Bank of Canada's strategy over the pastyear aimed at controlling inflation by raising
(01:29):
the overnight lending rate.
The objective was to bring inflation down totwo percent, which was achieved as higher
interest rates led to reduced consumer spendingon travel, home renovations, and dining out.
Orlando also mentioned that as interest rateshave decreased, consumer spending has picked
up, with more people willing to spend ondining, services, and physical goods.
(01:52):
The latest figures from Statistics Canada showthat the annual inflation rate dropped to 1.8
percent in December, which was lower thananticipated.
Reuters reported that a further decline ininflation could prompt the central bank to cut
rates again next week.
However, Bank of Canada Governor Tiff Macklemindicated last month that any future rate cuts
would be gradual.
(02:14):
A Reuters poll of economists suggests that manyexpect the bank to lower the rate again next
week.
An interesting factor influencing spending isthe federal GST/HST tax break that began on
December 14 and will last until February 14.
This tax break has led to reduced prices onitems such as alcoholic beverages, children's
(02:36):
clothing, toys, video game consoles, andrestaurant meals, particularly in provinces
with the Harmonized Sales Tax.
For Canadians with variable rate mortgages, arate cut means that more of their monthly
payment goes toward the principal, reducing theoverall interest paid over time.
However, for those with fixed rate mortgages, aBank of Canada rate cut does not have an
(02:59):
immediate impact.
If the Bank of Canada decides to hold thelending rate at 3.25 percent, it would mean
little change for the average Canadian.
Orlando believes that the bank may need tostart holding rates steady in the near future,
possibly as soon as the next meeting in March.
He predicts that by the end of 2025, the bankwill have cut the lending rate by a total of
(03:21):
100 basis points, bringing it down to twopercent.
The next interest rate announcement from theBank of Canada is scheduled for March 12.
We'll be keeping a close eye on developmentsand will update you with any significant
changes.
In a significant move, TD Bank is planning tosell approximately $9 billion in residential
(03:43):
mortgages.
This decision comes as the bank seeks to adjustits balance sheet in response to an asset cap
imposed by United States regulators.
The asset cap is part of a settlement agreementfollowing charges of inadequate money
laundering controls.
The portfolio that TD Bank is looking to sellprimarily consists of jumbo mortgages, which
are loans extended to United States homeownerswith strong credit profiles.
(04:06):
According to reports from BNN Bloomberg, bidsfor these loans are expected to be received by
next week.
While a TD spokesperson declined to provideadditional comments to Canadian Mortgage
Trends, they confirmed the accuracy of thedetails reported by BNN Bloomberg.
This development follows a significant event inOctober 2024, when TD Bank agreed to pay over
(04:28):
$3 billion in fines and accepted growthrestrictions in the United States as part of
its settlement.
The Office of the Comptroller of the Currency,the United States regulator overseeing TD Bank,
imposed an asset cap that limits the bank’sability to expand its retail business beyond
its current asset levels.
(04:48):
To comply with this asset cap and maintainoperational flexibility, TD Bank is undertaking
a restructuring of its holdings.
This restructuring includes selling up to $50billion in lower-yielding investment
securities.
The proceeds from these sales will bereinvested to optimize the bank's balance sheet
and meet the regulatory requirements.
(05:09):
The decision to sell such a substantial amountof mortgages is a strategic move by TD Bank to
align with regulatory expectations whileensuring the bank's continued growth and
stability.
It's a reminder of the complex regulatorylandscape that financial institutions must
navigate, particularly when operating acrossinternational borders.
(05:29):
In Ottawa, the housing market has witnessed aremarkable surge, with a 75 percent increase in
new housing sales in 2024 compared to theprevious year.
This significant growth has been primarilyfueled by the demand for multi-family units,
particularly townhouses.
According to a recent report by Zonda Urban,the sale of townhouses skyrocketed, with 1,997
(05:53):
units sold in 2024, marking a 72 percentincrease from the previous year.
The sales momentum for townhouses peaked in thefourth quarter, with 858 new townhouses sold,
reflecting an 84 percent increase from the sameperiod in 2023.
The west and southwest regions of Ottawa,notably Barrhaven and Stittsville, were key
(06:16):
areas driving this demand, accounting for morethan half of all townhouse sales.
Meanwhile, Kanata and Orleans contributed anadditional quarter of the market activity.
Affordability has been a crucial factor in thismarket growth.
Stacked townhouses, which made up nearly halfof the new townhouse inventory, were sold at an
average price of $387,150.
(06:41):
These units offered an average size of 1,066square feet.
In contrast, traditional townhouses, which aremore spacious at 1,801 square feet, were priced
higher, averaging $588,334.
Interestingly, the demand for townhousesoutpaced that for new condominium apartments,
(07:04):
which, despite experiencing a 204 percentyear-over-year increase in sales, remained a
smaller segment of the market.
Only 82 new condominium apartments were sold in2024, leaving 225 units unsold at the year's
end.
Zonda Urban's report attributes part of thisrebound to a strategic shift by developers in
(07:24):
late 2023.
Developers adjusted their pricing and productofferings to focus on more compact and
affordable townhouse options, aligning withbuyer demand.
As Pauline Lierman, Vice President of MarketResearch at Zonda Urban, noted, "Ground-related
townhouses really are the engine of thismarket."
Fourteen new townhouse developments launched in2024, with an impressive 67 percent absorption
(07:49):
rate of released units by the end of the year.
The average price of these newly launchedtownhouses stood at $490,963.
The report anticipates that the strong demandfor townhouses will persist into 2025, driven
by relatively affordable price points and thecontinuing appeal of suburban communities in
Ottawa.
(08:10):
In a recent report by Oxford Economics,Canada's housing needs are projected to
decrease by 500,000 homes by the year 2035.
This significant change is driven by ananticipated decline in the country's
population, as outlined in the research.
The revision to Canada's long-term housingsupply needs is based on a predicted 0.2
(08:32):
percent annual population decrease over thenext two years, largely attributed to recent
changes in immigration policy introduced by thefederal government.
According to Oxford Economics, Canada'spopulation is expected to decline to 41.1
million in 2026 from 41.3 million in 2024.
(08:54):
This marks the first population decrease sinceConfederation in 1867.
As a result, the household formation forecasthas been revised downward from 2.9 million to
2.5 million between now and 2035.
The research paper, authored by economistMichael Davenport and Tony Stillo, Director of
(09:15):
Canada Economics at Oxford, suggests that about500,000 fewer homes will need to be built by
2035 to rebalance the housing market.
In October, the federal government unveiled its2025-2027 Immigration Levels Plan, which lowers
the target for permanent resident admissions tounder 400,000 annually.
(09:37):
This represents a decrease of more than 20percent compared to the previous plan.
The updated plan also aims to reduce the shareof temporary residents to 5 percent of the
population by the end of 2026.
These new targets are expected to lead to anunprecedented net outflow of 445,000 temporary
residents each year over the next two years.
(09:58):
Oxford Economics notes that this markedslowdown in immigration levels is expected to
result in 1 million fewer people living inCanada by 2030 compared to previous estimates.
Not only will this have an impact on housingneeds, but it is also expected to slow GDP
growth in 2025 by 0.1 percentage point to 1.3percent.
(10:20):
The growth rate is anticipated to be an averageof 1.7 percent in 2026 and 2027, which is 0.5
percentage points lower than previouslyexpected.
The report highlights that the weaker growth inconsumption and housing due to a smaller
population will dampen the boost to Canada'seconomy from lower interest rates and stronger
global demand.
(10:41):
However, the reduction in housing needs overthe next decade is expected to help close the
housing supply gap, which has struggled to keeppace with demand in recent years.
Oxford Economics forecasts a less daunting waveof new homebuilding in the coming decade,
projecting housing starts to crest just below300,000 units later this decade, compared to
the 350,000 range in its previous forecast.
(11:05):
With new homebuilding having slowed in thesecond half of 2024, Oxford expects that
activity will likely continue to cool throughthe winter due to the lagged impact of past
interest rate hikes and improving, yetstill-soft, housing demand.
Additionally, escalating building and materialcosts are leading many developers to delay or
cancel new projects, particularly multi-unitdwellings in Toronto and Vancouver.
(11:31):
However, as interest rates continue to decline,building costs stabilize, and government
initiatives to address Canada's chronic housingshortfall take effect, Oxford predicts that
housing starts will gradually increase,positively impacting affordability.
The authors of the report conclude thatstronger growth in housing supply than demand
over the medium term will cause house prices torise at a slower pace than incomes on average.
(11:57):
Despite a smaller population over the next twoyears and slower population growth thereafter,
it is expected to take around a decade torestore housing affordability at the national
level.
This report provides a comprehensive look atthe evolving landscape of Canada's housing
market, influenced by demographic shifts andpolicy changes.
(12:18):
It's essential to consider these factors as wenavigate the future of real estate and housing
in Canada.
Thanks for tuning in to another episode of theOntario Mortgage & Real Estate Insights
Podcast.
We hope you found today's insights valuable asyou navigate the world of mortgages and real
estate.
Before you go, a quick reminder (12:36):
Real Approved is here to make your mortgage journey smoother.
Whether you're buying your first home orrefinancing, their experienced team is ready to
guide you with personalized support every stepof the way.
Visit realapproved.ca to get started and takethe next step toward achieving your
homeownership goals.
(12:57):
Catch you next time, and stay informed with thelatest industry insights!
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