Latest in Mortgage News, COVID-19, and Economic Recovery.
Diane Buchanan • June 24, 2020
Although the volume of news over the last month has been pretty tame in comparison to when COVID-19 initially hit, there has still been a lot going on. If you find yourself wondering about the current state of affairs as it relates to real estate, mortgage financing, and the recovery of our economy mid and post-pandemic, you’ve come to the right place!
Here is a quick recap, a look forward, and links to many good sources of information!
Questionable economic outlook.
Back in the third week of May, the head of the Canadian Mortgage and Housing Corporation (CMHC) made some pretty gloomy predictions.
These Included a potential decrease in house prices of 18%, a jump in mortgage deferrals by 20% from 12% by September, and a debt-to-GDP ratio jump from 99% to 130% by Q3.
However, this particular economic outlook wasn’t widely accepted in the mortgage industry and was seen more as an absolute worst-case scenario. Despite this, CMHC went ahead and made changes to their underwriting guidelines
and qualifying criteria for insured mortgages.
CMHC changes policy for insured mortgages.
On June 4th, 2020, CMHC announced that they would be making changes to their underwriting qualification effective July 1st 2020.
Essentially, they have lowered the buying power of anyone looking for an insured mortgage by up to 10% by limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to 35% and 42% respectively. They changed the credit score requirements to a minimum of 680 for at least one borrower. While they also removed non-traditional sources of down payment that increase indebtedness, (borrowed downpayment). A gifted downpayment from a family member is still acceptable.
Genworth and Canada Guaranty don’t plan on changing guidelines.
In response to CMHC’s changes, the other two mortgage insurers in Canada made announcements that they would not be changing their guidelines.
“Genworth Canada believes that its risk management framework, its dynamic underwriting policies and processes and its ongoing monitoring of conditions and market developments allow it to prudently adjudicate and manage its mortgage insurance exposure, including its exposure to this segment of borrowers with lower credit scores or higher debt service ratios,” said Stuart Levings, President and CEO.
“Canada Guaranty confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements… Given implementation of the qualifying stress test and historic default patterns, Canada Guaranty does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults.”
So although CMHC is taking a very pessimistic view towards our economic recovery and has made it harder to qualify for an insured mortgage going forward, Genworth and Canada Guaranty will be there to make sure more Canadians have access to insured mortgage products.
Economic Outlook from the Bank of Canada.
On June 22nd, Tiff Macklem, the new governor of the Bank of Canada, released his first public press release called Monetary Policy in the Context of COVID-19.
“Currently, we expect growth to resume in the third quarter. The economy will get an immediate boost as containment measures are lifted, people are called back to work, and households resume some of their normal activities. But it will be important not to assume that these growth rates will continue beyond the reopening phase. The pandemic is likely to inflict some lasting damage to demand and supply. The recovery will likely be prolonged and bumpy, with the potential for setbacks along the way.”
Conference Board of Canada.
In a sizeable release, the Conference Board of Canada shared their Canadian Outlook Summary: Summer 2020.
“With the worst of the recession likely over, the outlook for 2021 is brighter. The economy is forecast to rebound by 6.7 per cent in 2021 and 4.8 per cent in 2022. As the threat of the pandemic eases, how well the reopening of the economy and the withdrawal of government support is managed will be a crucial determinant of the economy’s trajectory over the next several years.”
Business as usual.
By all accounts, it’s business as usual amid this global pandemic. Although COVID-19 has impacted the number of houses being bought and sold, prices haven’t dropped. CMHC has made it harder to qualify for an insured mortgage through them, but you have two other insurers providing options, so it’s not a big deal.
If you’re looking to make a move or need to discuss mortgage financing, please don’t hesitate to contact me anytime.
I would love to work with you!
Need to Free Up Some Cash? Your Home Equity Could Help If you've owned your home for a while, chances are it’s gone up in value. That increase—paired with what you’ve already paid down—is called home equity, and it’s one of the biggest financial advantages of owning property. Still, many Canadians don’t realize they can tap into that equity to improve their financial flexibility, fund major expenses, or support life goals—all without selling their home. Let’s break down what home equity is and how you might be able to use it to your advantage. First, What Is Home Equity? Home equity is the difference between what your home is worth and what you still owe on it. Example: If your home is valued at $700,000 and you owe $200,000 on your mortgage, you have $500,000 in equity . That’s real financial power—and depending on your situation, there are a few smart ways to access it. Option 1: Refinance Your Mortgage A traditional mortgage refinance is one of the most common ways to tap into your home’s equity. If you qualify, you can borrow up to 80% of your home’s appraised value , minus what you still owe. Example: Your home is worth $600,000 You owe $350,000 You can refinance up to $480,000 (80% of $600K) That gives you access to $130,000 in equity You’ll pay off your existing mortgage and take the difference as a lump sum, which you can use however you choose—renovations, investments, debt consolidation, or even a well-earned vacation. Even if your mortgage is fully paid off, you can still refinance and borrow against your home’s value. Option 2: Consider a Reverse Mortgage (Ages 55+) If you're 55 or older, a reverse mortgage could be a flexible way to access tax-free cash from your home—without needing to make monthly payments. You keep full ownership of your home, and the loan only becomes repayable when you sell, move out, or pass away. While you won’t be able to borrow as much as a conventional refinance (the exact amount depends on your age and property value), this option offers freedom and peace of mind—especially for retirees who are equity-rich but cash-flow tight. Reverse mortgage rates are typically a bit higher than traditional mortgages, but you won’t need to pass income or credit checks to qualify. Option 3: Open a Home Equity Line of Credit (HELOC) Think of a HELOC as a reusable credit line backed by your home. You get approved for a set amount, and only pay interest on what you actually use. Need $10,000 for a new roof? Use the line. Don’t need anything for six months? No payments required. HELOCs offer flexibility and low interest rates compared to personal loans or credit cards. But they can be harder to qualify for and typically require strong credit, stable income, and a solid debt ratio. Option 4: Get a Second Mortgage Let’s say you’re mid-term on your current mortgage and breaking it would mean hefty penalties. A second mortgage could be a temporary solution. It allows you to borrow a lump sum against your home’s equity, without touching your existing mortgage. Second mortgages usually come with higher interest rates and shorter terms, so they’re best suited for short-term needs like bridging a gap, paying off urgent debt, or funding a one-time project. So, What’s Right for You? There’s no one-size-fits-all solution. The right option depends on your financial goals, your current mortgage, your credit, and how much equity you have available. We’re here to walk you through your choices and help you find a strategy that works best for your situation. Ready to explore your options? Let’s talk about how your home’s equity could be working harder for you. No pressure, no obligation—just solid advice.
How to Start Saving for a Down Payment (Without Overhauling Your Life) Let’s face it—saving money isn’t always easy. Life is expensive, and setting aside extra cash takes discipline and a clear plan. Whether your goal is to buy your first home or make a move to something new, building up a down payment is one of the biggest financial hurdles. The good news? You don’t have to do it alone—and it might be simpler than you think. Step 1: Know Your Numbers Before you can start saving, you need to know where you stand. That means getting clear on two things: how much money you bring in and how much of it is going out. Figure out your monthly income. Use your net (after-tax) income, not your gross. If you’re self-employed or your income fluctuates, take an average over the last few months. Don’t forget to include occasional income like tax returns, bonuses, or government benefits. Track your spending. Go through your last 2–3 months of bank and credit card statements. List out your regular bills (rent, phone, groceries), then your extras (dining out, subscriptions, impulse buys). You might be surprised where your money’s going. This part isn’t always fun—but it’s empowering. You can’t change what you don’t see. Step 2: Create a Plan That Works for You Once you have the full picture, it’s time to make a plan. The basic formula for saving is simple: Spend less than you earn. Save the difference. But in real life, it’s more about small adjustments than major sacrifices. Cut what doesn’t matter. Cancel unused subscriptions or set a dining-out limit. Automate your savings. Set up a separate “down payment” account and auto-transfer money on payday—even if it’s just $50. Find ways to boost your income. Can you pick up a side job, sell unused stuff, or ask for a raise? Consistency matters more than big chunks. Start small and build momentum. Step 3: Think Bigger Than Just Saving A lot of people assume saving for a down payment is the first—and only—step toward buying a home. But there’s more to it. When you apply for a mortgage, lenders look at: Your income Your debt Your credit score Your down payment That means even while you’re saving, you can (and should) be doing things like: Building your credit score Paying down high-interest debt Gathering documents for pre-approval That’s where we come in. Step 4: Get Advice Early Saving up for a home doesn’t have to be a solo mission. In fact, talking to a mortgage professional early in the process can help you avoid missteps and reach your goal faster. We can: Help you calculate how much you actually need to save Offer tips to strengthen your application while you save Explore alternate down payment options (like gifts or programs for first-time buyers) Build a step-by-step plan to get you mortgage-ready Ready to get serious about buying a home? We’d love to help you build a plan that fits your life—and your goals. Reach out anytime for a no-pressure conversation.
