Thank you to our economists Dr Sherry Cooper for the below 🙂

For this notoriously volatile data series, it is particularly true that ‘one month does not a trend make.’ Following last month’s dismal employment report, job growth rebounded in December, erasing almost half of the earlier decline (even more if you exclude transitory factors in November). As well, the unemployment rate reversed much of its November spike, capping the second-best year of job growth since the recession and supporting the Bank of Canada’s view that the Canadian economy is resilient.

Canada’s economy created 35,200 net new jobs in December, bringing the total number of jobs added to 320,300 in 2019, the second-most since 2007. The jobless rate ticked down three basis points to 5.6% and wage gains decelerated to a still-healthy 3.8% from a year earlier.

All of the job creation was in full-time employment in the private sector. Provincially, employment gains in December were led by Ontario and Quebec; British Columbia led declines. Construction jobs increased markedly, with BC and Ontario contributing the most to the rise. Following two months of decline, employment in manufacturing was little changed in December. The trade war has hit manufacturing hard, and even though a trade deal will be signed by China and the US next week, it does not eliminate the bulk of the tariffs imposed in the past year.

In December, BC continued to have the lowest jobless rate in the country at 4.8% (see Table below). Ontario and Quebec are now running neck-in-neck following a period of stronger job growth in Quebec. Atlantic Canada remains in the last place with secularly high unemployment rates–a long-standing situation.

Bottom Line: the December employment report confirms the Bank of Canada’s current policy stance that despite headwinds, the Canadian economy remains relatively resilient and that further interest rate cuts are unnecessary. This assessment can change on a dime in today’s uncertain world, but for now, the central bank is likely to remain on hold. Interest rates have risen in the past six-to-eight weeks owing to market forces. The fourth-quarter GDP growth in Canada has slowed markedly on weakness in consumer and business spending; hence the Bank will be monitoring closely upcoming data. We are forecasting roughly 1.8% growth in the economy in 2020, about in line with the 2019 pace. With very tight labour markets, the output gap has closed, and the economy will run at the longer-run potential growth pace consistent with our forecast.

Consumer Confidence Down

Canadian consumers appear to be less sanguine about the outlook than economists. In an end-of-year survey for Bloomberg News by Nanos Research Group, 55% of Canadians said there’s at least a “somewhat likely” chance of a recession this year. Only 33% reported a recession is unlikely, with 12% unsure. According to Bloomberg News, ” the downbeat perceptions reflect a pervasive sense of caution that has dogged the country’s households for more than a year and impacted their behaviour.”

Excluding housing, annual growth in total household consumption has averaged 1.1% in real terms over the past four quarters, the slowest pace outside recession since at least 1962. Another sign of cautiousness: savings rates are inching higher and are now at their highest level since 2015.

Bloomberg reports that “there are also indications that consumer worries have levelled off. The results are little changed from a similar poll taken at the end of November. A separate gauge of consumer confidence — the Bloomberg Nanos Canadian Confidence Index — saw a rebound in December from a two-month slide, as stock markets surged at the end of last year and sentiment around real estate recovered.”

Not surprisingly, recession concerns are most pronounced in prairie provinces like Alberta, where almost three-quarters of households see a chance of a 2020 contraction. Alberta has been hard hit by the plunge in oil prices since mid-2014 and is only slowly recovering. A majority of respondents in British Columbia and Ontario are also concerned a downturn is imminent. Quebec was the only province where optimists outnumbered pessimists.

Consumer confidence in the US has also declined, yet the stock markets in both countries continue to post record highs. We are in the eleventh year of economic expansion, the longest expansion on record, although it is not the strongest. Unlike the US, Canada has benefitted from a surge in immigration in the past three years, boosting growth.

Canadian housing markets have rebounded considerably from the Jan 1, 2018 imposition of the B-20 mortgage stress tests and fiscal stimulus is likely in the next budget,

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Thank you to our Economist for the below ….. some great insight!

HUGE DECLINE IN JOBS IN NOVEMBER AS JOBLESS RATE SURGES

One month does not a trend make. Statistics Canada announced this morning that the country lost 71,200 jobs in November, the worst performance in a decade. What’s more, the details of the jobs report are no better than the headline. Full-time employment was down 38.4k, and the private sector shed 50.2k. The jobless rate also rose sharply, up four ticks (the most significant monthly jump since the recession), to 5.9%. Hours worked fell 0.3%, and remain an area of persistent disappointment—they’re now up just 0.25% y/y, much more muted than the 1.6% annual job gain.

The one area of strength was wages, with growth accelerating to match a cycle high at 4.5% y/y. But wages tend to lag the labour market cycle, so if this weakness is the start of something bigger, wages gains are likely to slow.

The monthly moves were soft, no matter how you slice them. Both full-time (-38.4k) and part-time employment (-32.8k) were down. Similarly, private sector employment (-50.2k) led the way, but self-employment (-18.7k) and the public sector (-2.3k) also saw net losses.

Until last month, we saw a long string of robust job reports in what is usually a very volatile data series, so a correction is not surprising. But this report appears to be more than a statistical quirk and belies the Bank of Canada’s statements this week that the Canadian economy remains resilient. Employment is still up 26k per month in 2019 to date consistent with a 1.6% y/y gain, and most of that comes from full-time work. And some of the drop in November reflected a decline in public administration jobs retracing October’s gain that might have been related to the federal election. Nevertheless, the 0.4 percentage point uptick in the jobless rate is the largest since the financial crisis in early 2009, and manufacturing jobs were down more than 50k over the past two months.

By industry, job declines were widespread in the month, with only 5 of 16 major sectors posting improvement. Net losses were shared across both the goods and service sectors. Manufacturing (-27.5k) shed jobs for a second month, and notable declines were seen in public administration (-24.9k, likely a reflection of post-election adjustment) and accommodation and food services (-11k).

By region, Ontario and PEI were the only provinces to manage job growth last month, with all others deeply in the red. Quebec stands out, shedding 45.1k net positions in a second monthly employment decline and pushing the unemployment up to 5.6% (from 5.0%; the largest monthly increase in nearly eight years). Quebec’s jobless rate is now equivalent to that in Ontario. Things were not much better out west: Alberta and B.C. both lost 18.2k net positions. In the case of the former, this was enough to send the unemployment rate up half a point, to 7.2%. Ontario bucked the trend, adding 15.4k net positions, just shy of erasing the prior month’s drop. Still, the unemployment rate in the province rose to 5.3% (from 5.0%), as more people joined the labour force. (See the table below.)

Job growth slowed in the second half of this year. Over that period, the average monthly job gain has been a paltry 5.9k compared to an average monthly gain of 24.4k over the past year. For private sector employment, the equivalent figure flipped into negative territory (-4.3k) for the first time in more than a year.

Bottom Line: Today’s report means that the Bank of Canada will be keeping an even more watchful eye on the jobs report. The year-on-year pace of net hiring has decelerated for three straight months now, driven in large part by a slowing pace of private-sector hiring. It seems a safe bet that even if we see some recovery in the coming months, the substantial gains of recent years are unlikely to be repeated.

The Bank of Canada has been emphasizing Canada’s economic resilience in its recent communications. One month of soft jobs data will hardly break that narrative, but coming after a modest October, it is not hard to imagine a hair more worry about the durability of growth. The bigger question is whether this weakness persists, and more importantly if it feeds into consumer spending behaviour and housing activity, the Bank’s key bellwethers.

We continue to believe that the BoC will cut rates in 2020, owing mainly to Canada’s vulnerability to trade uncertainty. The loonie sold off sharply on the employment news, particularly so because of the stronger-than-expected labour market report released this morning in the US.

The Canadian economy continues to stubbornly support the Bank of Canada’s interest rate policy.  Market watchers are pretty much unanimous in their projections that the central bank will stay on the sidelines, again, when it makes its rate announcement later this week.

The latest numbers from Statistics Canada show gross domestic product grew by 1.3% in the third quarter.  That is a slow down, but it is a long way from anything that would trigger BoC intervention.  Consumer spending and housing are seen as the main drivers of that growth.

Housing has recovered nicely from its sluggish performance earlier this year and it would seem that the market has made a soft landing.   But the Bank continues to worry that lowering interest rates could spark another round of debt-fueled buying.  In the Bank’s opinion, high household debt remains a key vulnerability for the Canadian economy.

Of course an interest rate cut would weaken the relatively strong Canadian dollar which is hampering the export sector, but the Bank has said it would like to see other methods used to encourage exports and business investment.  Even lower interest rates and a weaker Loonie might not be enough to push through the international economic headwinds created by the current spate of tariff and trade wars that have slowed global growth.

Now the forecasters are looking as far ahead as the second quarter of 2020 before they see any interest rate activity.  By then we should being seeing the effects of the U.S. presidential election campaign.

Thank you to my DLC partner Kelly from BC for the below breakdown, very informative!

Mortgage [ˈmôrɡij] NOUN
With a residential mortgage, a home buyer pledges his or her house to the bank. The bank has a claim on the house should the home buyer default on paying the mortgage. In the case of a foreclosure, the bank may evict the home’s occupants and sell the house, using the income from the sale to clear the mortgage debt.

Mortgages in a Nutshell
Since homes are expensive, a mortgage is a lending system that allows you to pay a small portion of a home’s cost (called the down payment) upfront, while a bank/lender loans you the rest of the money. You arrange to pay back the money that you borrowed, plus interest, over a set period of time (known as amortization), which can be as long as 30 years.

When you get a mortgage loan, you are called the mortgagor. The lender is called the mortgagee.

How Do You Get a Mortgage?
The companies that supply you with the funds that you need to buy your home are referred to as “lenders” which can include banks, credit unions, trust companies etc.

Mortgage lenders don’t lend hundreds of thousands of dollars to just anyone, which is why it’s so important to maintain your credit score. Your credit score is a primary way that lenders evaluate you as a reliable borrower – that is, someone who’s likely to pay back the money in full WITHOUT a lot of hassle. A score of 680-720 or higher generally indicates a positive financial history; a score below 680 could be detrimental, making you a higher risk. Higher risk = higher rates!

How Mortgages Are Structured
Down payment: This is the money you must put down on a home to show a lender you have some stake in the home. Ideally you want to make a 20% down payment of the price of the home (e.g., $60,000 on a $300,000 home), because this will allow you to avoid the extra cost of Mortgage Default Insurance which is mandatory with all down payments of less than 20%.

Every mortgage has three components: the principal, the interest, and the amortization period.

Mortgages are typically paid back gradually in the form of a monthly mortgage payment, which will be a combination of your paying back your principal plus interest.

1. Principal: This is the amount of money that you are borrowing and must pay back. This is the price of the home minus your down payment
   taking the above example, purchase price $300,000 minus $60,000 down payment to get a mortgage (principal) of $240,000.
2. Interest rate: Lenders don’t just loan you the money because they’re nice guys. They want to make money off you, so you will be paying them back the original amount you borrowed (principal) plus interest—a percentage of the money you borrow.The interest rate you get from the lender will vary based on: property, lender, credit bureau, employment and your personal situation.
3. Amortization means life of the mortgage, or how long the mortgage needs to be, in order to pay off the complete loan (principal) plus interest. Mortgage loans have different “amortizations,” the two most common terms are 25 & 30 years.Within the life of the mortgage (amortization) you will have a Term. The length of time that the contract with your mortgage lender including interest rate is set up (typically 5 years). After your term completes, you can renew your mortgage with the same lender or move to a new lender.

WHEN TO GET A MORTGAGE

First Step: connect with a Mortgage Broker for a mortgage before you start hunting for a home. You need to know what you can afford – especially with all the new government regulations.

Ideally you need a mortgage pre-approval, which an in-depth process where a lender will check your credit report, credit score, debt-to-income ratio, loan-to-value ratio, and other aspects of your financial profile.

This serves two purposes:

1. It will let you know the maximum purchase price of a home you can afford.
2. A mortgage pre-approval shows home sellers and their realtors that you are serious about buying a home, which is particularly crucial in a hot housing market.

Types of Mortgages
How do you figure out which mortgage is right for you? Here are the 2 main types of home loans to consider:

1. Fixed-rate mortgage:This is the most popular payment setup for a mortgage. A fixed mortgage interest rate is locked-in and will not increase for the term of the mortgage.
2. Variable rate mortgage aka Adjustable Rate Mortgages (ARM) A variable mortgage interest rate is based on the Bank of Canada rate and can fluctuate based on market conditions and the Canadian economy. A mortgage loan with an interest rate that is subject to change and is not fixed at the same level for the life of the term. These types of mortgages usually start off with a lower interest rate but can subject the borrower to payment uncertainty.

How to Shop for a Mortgage?
Use a mortgage broker, a professional who works with many different lenders to find a mortgage that best suits the needs of the borrower.

Brokers specialize in Mortgage Intelligence, educating people about mortgages, how they work and what lenders are looking for. Everyone’s home purchasing situation is different, so working with us will give you a better sense of what mortgage options are available based on the 4 strategic priorities that every mortgage needs to balance:

• lowest cost
• lowest payment
• maximum flexibility
• lowest risk

Most Canadians are conditioned to think that the lowest interest rate means the best mortgage product. Although sometimes that is true, a mortgage is more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print, not just the rate.

Banks tend to concentrate on the 5 year fixed mortgage rate (since that’s the best option for them)… rates are important, however your Dominion Lending Centres mortgage professional will look at the total cost of the mortgage. Brokers will advise & explain mortgage options, help you understand the implications of your choice and help you avoid the pitfalls of choosing a mortgage based on rates alone.

Thank you to our Chief Economist Dr Sherry Cooper!

Some very interesting and thought provoking facts sourced from Equifax by one or our Lenders, First National.  Enjoy!

Ongoing affordability challenges and tougher mortgage qualification rules have homebuyers turning to alternative lenders, but some are also turning to alternative facts.

A recent survey by credit monitoring service Equifax suggests there is a growing acceptance of fudging the numbers on mortgage applications, especially among younger house hunters.  Nearly a quarter of the millennials (23%) surveyed believe it is acceptable to inflate income on a mortgage application.  That is nearly double the rate (12%) for the overall population.  Nineteen percent of the millennials surveyed actually admit to falsifying their application.

The survey also suggests 53% of consumers believe mortgage fraud is a growing problem.  But there are indications there may be a misunderstanding of what constitutes fraud.  Among those surveyed, 51% indicated it was most likely to be committed by organized crime.  That number climbs to 56% among millennials.  At the same time 16% of respondents called mortgage fraud a victimless crime.  For millennials the number jumps to 23%.

The numbers would seem to suggest that many people do not see a “little white lie” on a mortgage application as fraud or a real crime.  While it is unlikely any consumer is going to go to jail for “fiddling the numbers” on their mortgage application – as Equifax points out – getting caught in a lie, or becoming over extended because of a falsified document can have long lasting effects on a consumer’s credit rating

This is a great indicator and the below also touches on Stress Test Impact and other variables, thank you Dr Cooper!

Housing resales rose for the sixth consecutive month in August as prices increased across the country. August marked the largest one-month gain in Canadian home prices in two years.

Statistics released today by the Canadian Real Estate Association (CREA) show that national home sales rose for the sixth consecutive month. Transactions are now running almost 17% above the six-year low reached in February 2019, but remain about 10% below highs reached in 2016 and 2017. Toronto, Montreal and Vancouver all saw sales and prices rise. CREA updated its 2019 sales forecast, now predicting a 5% gain this year. Gains were led by a record-setting August in Winnipeg and a further improvement in the Fraser Valley. These confirm signs that the country’s housing market is returning to health.

Actual (not seasonally adjusted) sales activity was up 5% from where it stood in August 2018. The number of homes that traded hands was up from year-ago levels in most of Canada’s largest urban markets, including the Lower Mainland of British Columbia, Calgary, Winnipeg, the Greater Toronto (GTA), Ottawa and Montreal.

New Listings
The number of newly listed homes rose 1.1% in August. With sales and new supply up by similar magnitudes, the national sales-to-new listings ratio was 60.1%—little changed from July’s reading of 60.0%. The measure has risen above its long-term average (of 53.6%) in recent months, which indicates a tighter balance between supply and demand and a growing potential for price gains.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in August 2019. Of the remainder, the ratio was above the long-term average in all markets save for some in the Prairie region.

There were 4.6 months of inventory on a national basis at the end of August 2019 – the lowest level since December 2017. This measure of market balance has been increasingly retreating below its long-term average (of 5.3 months).

There is considerable regional variation in the tightness of housing markets. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure is running well below long-term averages in Ontario, Quebec and Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains. Meanwhile, the measure is well centred in balanced-market territory in the Lower Mainland of British Columbia, making it likely that prices there will stabilize.

Home Prices
Canadian home prices saw its biggest one-month gain in two years. The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% m-o-m in August 2019.

Seasonally adjusted MLS® HPI readings in August were up from the previous month in 14 of the 18 markets tracked by the index, marking the biggest dispersion of monthly price gains since last March.

In recent months, home prices have generally been stabilizing in British Columbia and the Prairies, a measure which had been falling until recently. Meanwhile, price growth has begun to rebound among markets in the Greater Golden Horseshoe (GGH) region amid ongoing price gains in housing markets east of it.

A comparison of home prices to year-ago levels yields considerable variations across the country, with declines in western Canada and price gains in eastern Canada.

The actual (not seasonally adjusted) Aggregate Composite MLS® (HPI) was up 0.9% year-over-year (y/y) in August 2019. This marks the second consecutive month in which prices climbed above year-ago levels and the most substantial y/y increase since the end of last year.

Home prices in Greater Vancouver (GVA) and the Fraser Valley remain furthest below year-ago levels, (-8.3% and -5.5%, respectively). Vancouver Island and the Okanagan Valley logged y/y increases of 3.7% and 1.5% respectively.

Prairie markets posted modest price declines, while y-o-y price growth has re-accelerated ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth has continued uninterrupted for the last few years in Ottawa, Montreal and Moncton.

All benchmark home categories tracked by the index returned to positive y/y territory in August. Two-storey single-family home prices were up most, rising 1.2% y/y. This category of homes had .been hardest hit during the slump. One-storey single-family home prices rose 0.7% y/y, while townhouse/row and condo apartment units edged up 0.3% and 0.5%, respectively.

Stress Test
Canada’s introduction of stricter mortgage-lending rules last year inhibited some potential home buyers. Until recently, declining interest rates and lower home prices may have allowed some of those buyers to return to the market, according to the CREA report.

“The recent marginal decline in the benchmark five-year interest rate used to assess homebuyers’ mortgage eligibility–from 5.34% to 5.19%–together with lower home prices in some markets, means that some previously sidelined homebuyers have returned,” said Gregory Klump, CREA’s chief economist. “Even so, the mortgage stress-test will continue to limit homebuyers’ access to mortgage financing, with the degree to which it further weighs on home sales activity continuing to vary by region.”

CREA also updated its forecasts. National home sales are now projected to recover to 482,000 units in 2019, representing a 5% increase from the five-year low recorded in 2018. The upward revision of 19,000 transactions brings the overall level back to the 10-year average, but remains well below the annual record set in 2016, when almost 540,000 homes traded hands, CREA said.

Bottom Line: This report is in line with other recent indicators that suggest housing has recovered from a slump earlier, helped by falling mortgage rates. The run of robust housing data gives the Bank of Canada another reason — along with robust job gains, higher wage rates and stronger than expected output growth in Q2 — to hold interest rates steady, even as more than 30 central banks around the world have cut interest rates further.

The Federal Open Market Committee meets again on Wednesday, and it is widely expected that they will cut rates by 25 basis points as the White House is calling for “emergency easing moves.” The Trump administration has just in the past few days succumbed to political pressure to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.

As a result of this recent easing in trade tensions and last week’s cut in overnight rates further into negative territory by the European Central Bank, the flight to US Treasury bond safety diminished, raising the US and Canadian government bond yields by roughly 25 basis points from extremely low levels. Canadian 5-year bond yields at 1.48% are at their highest level in two months. In consequence, the spread between the best 5-year fixed mortgage rates and 5-year government bonds is at a very tight 77 basis points, which is likely not sustainable. A more normal spread between the two is 120-ish (or more) for the best rates and 150-plus-ish (for regular rates). Some lenders are already hiking mortgage rates.

The situation has been compounded with even more considerable uncertainty with the weekend bombing of the Saudi Aramco oil fields, taking an estimated half of all Saudi oil out of production. Stay tuned.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Rates are still low and appear to remain so for a while still.  Thank you to our Chief Economist, Dr Cooper, for the below insight!

Great insight from my colleague Dave :  Thank you Dave!

RAISE YOUR CREDIT SCORE IN 3 MONTHS

While people often think of mortgage brokers when they are first time home buyers, we can help people in a variety of different ways.
Recently Garrett LaBarre of Calvert Home Mortgages in Calgary shared a success story with brokers. He had a client referred to him by a mortgage broker who had a conundrum. She was paying her credit card balances on time month after month, but couldn’t get them paid down due to the high interest rates.  As a result, she had a 567 credit beacon score. Her bank would not refinance her mortgage or offer her a debt consolidation loan. She was stuck.
The solution was to use some of the equity in her home to pay off the credit card debt and lower the payments to a more manageable monthly. Even though her mortgage interest rate was higher than a regular lender, it was a lot lower than a credit card rate and it was amortized over 30 years.
The result was that within three months this client had her credit score jump from 567 to 769!
What an amazing result. Now there’s one more person who knows that mortgage brokers can do things that the banks can’t do.
If you have a challenging story, be sure to contact your local Dominion Lending Centres mortgage professional for help.