Bank of Canada Quarterly Review

The Bank of Canada recently released its Quarterly Review which discusses everything from household debt, income to debt ratios, the future of Canadian real estate and Canadian monetary policy. The entire report can be found here. Royal Bank of Canada Economics did a thorough review of the report and key findings are underneath. Let me just say, their take on it was quite positive in terms of our current economic standing, and Canadian real estate health moving forward.


Canadian highlights from the quarterly Bank of Canada Review
·      The winter issue of the Bank of Canada Review focused on risks associated with Canadian household finances and the related risks to financial stability.

·      The topics of the four papers released were household debt trends, household borrowing and spending, fluctuation in house prices, and household insolvency.

·      The elevated levels of debt make households “more vulnerable to adverse shocks,” although downplay the risk of such a shock arising from housing in noting that “the Canadian housing market has not exhibited the excesses seen in other countries where severe economic disruptions have occurred in recent years.”

·      Given our outlook and an absence of catalysts for a sharp correction in the labour or housing markets, we see limited risk of a household driven downturn ahead.

The Bank of Canada Review is a compilation of research conducted by Bank of Canada staff, and the latest edition released today indicated that the central bank is exerting a fair amount of brain power into analyzing the financial position of Canadian households and the underlying factors that have been driving the accumulation of mortgage and consumer credit.

The first two articles (What…


New Lender Announcement! Welcome MONCANA.

I would like to pleasantly introduce a new lender, MonCana, to our roster of lenders who work with us.

I had the pleasure of talking with Ron Cawfield, my Business Development Manager, about MonCana, their products and strategies, and came away from the discussion feeling that there’s a new sheriff in town. Except, MonCana isn’t “new” in the sense that the people behind the company are newcomers to the business. Having been started by the people responsible behind Bridgewater and Resmor Trust, there is enough experience behind the MonCana team that I know I’m dealing with people who know what they are doing.

Let’s highlight some positives:

1. In-house customer service. Don’t you hate when you call a company and either the service lines are outsourced overseas OR even somewhere in North America? I do. I hate when the people on the other end don’t know as much about the products and policies as I (the customer) do. Not here. MonCana will have their own in-house service lines dedicated to their own customers, only.

2. Fair IRD policy: Not only do they calculate IRD based on discount-to-discount, but they also apply the 20% pre-payment privilege to further reduce the penalty (should there be a scenario the mortgage can’t be refinanced or ported, of course).

3. FULL Schedule 1 bank. Out of an estimated 40 applications, only MonCana was granted Schedule 1 status. RBC? Schedule 1. BMO? Same. Now add MonCana to the heavyweights. This is clearly a huge step as the trust behind the name will be there right from the start.

Some other notes: MonCana will have online access in the near future, they work with CMHC and are working on adding other insurers very soon, and have a thorough stable of products available to…


Our Other Insurer?

Genworth Canada Mortgage Insurance or GNW MI is a direct competitor to CMHC. I wondered whether they operate under a lending limit much like CMHC, and where they are. After speaking to a Business Development Manager, I was told through a link to their annual SEDAR filing:

“Legislation authorizes the Canadian government to enter into contracts providing the type and degree of guarantee benefit provided under the Government Guarantee Agreement, and further provides an aggregate cap of $250 billion on the outstanding principal amount of mortgages insured by private mortgage insurers with such agreements.  The Company believes that, as of December 31, 2010, it had approximately $196 billion in outstanding principal amount of mortgages that counted toward this cap.  Historically, as outstanding principal mortgage amounts approach the legislative cap, the federal government has increased the cap to ensure seamless continuity for Genworth Canada, CMHC and the industry.”

So clearly Genworth Canada is also close to the limit!

Let’s hope the Government of Canada raises the limits. Let’s be clear here: I’m not treating this issue lightly, and don’t think that we should continue to give loans to everyone. However the real estate market has kept on chugging along and while prices have gone up, so have mortgage loans. This isn’t akin to raising the debt ceiling in the US for example. This is simply allowing lenders and mortgage insurance companies to keep working diligently and issuing loans to high-quality borrowers. The checks-and-balances are in place already.

Let’s see how this whole thing plays out.

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