The latest in mortgage news: Half of borrowers concerned about mortgage renewals

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Nearly half (47%) of Canadians buying or renewing a mortgage say they are concerned about qualifying for the amount they need.

That’s according to a new study from BNN Bloomberg and RATESDOTCA, which noted that 16% of those respondents who are buying or renewing are “very concerned” about their ability to qualify.

Specifically among those who are planning to purchase a home in the next 12 months, nearly three quarters (71%) say they are concerned about qualifying, with 34% “very” concerned.

Since March 2022, the Bank of Canada has increased its overnight target rate by 425 basis points to 4.50%. That has sharply raised borrowing costs for those with variable mortgage rates or lines of credit, including Home Equity Lines of Credit. Fixed mortgage rates have also roughly doubled from the 2%-range in late 2021 to at or above 5% today.

That has affected the ability of some borrowers, particularly younger first-time borrowers, to qualify for the mortgage they require. The survey found that 60% of those between the ages of 18 and 34 are concerned about their ability to qualify. That’s compared to 47% and 29% for those between the ages of 35 and 54, and those aged 55 and above, respectively.

The qualification challenges mean more borrowers are considering alternatives to traditional lenders. Among those intending to make a purchase, nearly a third (29%) say they are considering an alternative lender, the survey found. Another 11% said they would consider asking family or friends for money, while other options considered include using a subprime or private lender (11%), or a monoline lender or credit union (8%).

Businesses and consumers preparing for recession: BoC outlook surveys

Both consumers and businesses are bracing for a recession in the next 12 months, according to the latest quarterly outlook surveys released by the Bank of Canada.

In the Q1 Business Outlook Survey, which is based on interviews with roughly 100 Canadian business leaders, expectations are for sales to continue to slow due to both recession worries and the impact of high inflation on consumers’ disposable income.

“While about half of firms have incorporated the risk of a recession over the next 12 months into their business plans, they expect any potential recession to be mild,” the survey reads. “Some firms planning for a recession expect softer demand growth and are less likely to add staff or increase their investment spending.”

And while short-term inflation expectations have moderated, businesses continue to expect “persistent inflationary pressures” due to high labour costs and strong domestic demand.

Inflation expectations among consumers have also fallen in the quarter, according to the Bank’s Canadian Survey of Consumer Expectations, which was released on the same day.

“Canadians’ concerns about inflation are still high but appear to be easing,” the survey says, while adding Canadians remain frustrated by high food prices. Consumers also believe the Bank will have challenges reaching its neutral target of between 1% and 3% due in part to supply chain disruptions, the war in Ukraine and government spending.

Source: Bank of Canada

And like business leaders, consumers are also bracing themselves for recession.

“Most Canadians see a recession as the most likely scenario for the economy in the next 12 months,” the report noted, adding that consumers say they plan to “spend less and save more as a precaution.”

“[These] releases should encourage the Bank of Canada to remain on hold at its policy announcement next week,” wrote TD Economics economist James Orlando.

“Granted, GDP growth, employment data, and consumer spending have surged recently. But, if consumers and businesses adjust their behaviour in preparation of a slowdown, it becomes a self-fulfilling prophecy,” he added. “This implies that the string of positive surprises won’t last much longer.”

Building permits surge in February

The value of residential building permits in Canada rose 7.9% in February to $6.6 billion, Statistics Canada reported Tuesday. In total, permits were issued for 22,900 new units in the month.

Overall building permits in the country jumped 8.6% from January to a value of $10.7%. That’s compared to two consecutive monthly declines in December and January, and expectations of just a 2% monthly rise.

The overall increase was driven specifically by large gains in both Ontario (+10.7%) and Alberta (+25.6%). In all, seven provinces reported a monthly rise in building permits.

Looking at residential permits, three provinces saw declines, including British Columbia (-13.4%), Alberta (-3.9%) and Saskatchewan (-40.6%), StatCan reported.

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