Tag:

news

Business

Survey: US business executives’ outlook on global economy Improving, inflation and personnel issues top concerns

by Bailey Amber
written by Bailey Amber

According to the latest first-quarter AICPA & CIMA Economic Outlook Survey, US business executives still have significant concerns about the economy, but there has been a notable increase in optimism regarding revenue and profit expectations and other key performance indicators for the coming year. 

This survey collected responses from chief executive officers, chief financial officers, controllers, and other certified public accountants who hold executive and senior management accounting roles in US companies.

Although there has been progressed, with 23% of business executives expressing optimism about the US economy’s prospects over the next 12 months, there are still many concerns.

Only 12% felt optimistic in the previous quarter, which was the lowest level since early 2009. Factors such as inflation, rising interest rates, and geopolitical concerns continue to weigh heavily on the US outlook. Additionally, 90% of those surveyed expressed concerns about the potential impacts of a recession, with 15% of respondents indicating that they were significantly concerned.

The survey indicates that business executives are more optimistic about their companies’ financial performance despite these concerns. The results show that many expect revenue and profits to increase in the coming year, which is a positive sign for the US economy.

This quarter, there are several positive indicators:

Business executives are anticipating a slight profit growth of 0.6% over the next 12 months, which is a significant improvement from the negative or zero growth projections over the past two quarters. Additionally, 12-month revenue growth projections have increased from an expected rate of 2.1% last quarter to 2.6%.

Furthermore, the number of business executives expressing optimism about their own organisations’ prospects over the next 12 months has increased from 35% to 47% quarter over quarter. This positive trend suggests business leaders are more confident in their companies’ abilities to weather economic uncertainties.

Additionally, more business executives are expecting their companies to expand at least somewhat over the next 12 months, with 52% of respondents indicating expansion plans, up from 47% last quarter. Among businesses with over a billion dollars in revenue, the proportion expecting expansion is even higher, with 68% indicating plans to expand.

The survey also revealed other important findings:

U.S. business executives’ outlook on the global economy for the next 12 months has improved, with the proportion expressing pessimism decreasing from 72% in the previous quarter to 48% currently.

For the sixth consecutive quarter, inflation remains the top concern for business executives. However, the challenges of “Availability of Skilled Personnel” and “Employee and Benefit Costs” have switched places and are now the second and third most significant challenges, respectively.

“While hiring demands may be cooling a bit, we’re not seeing widespread layoffs – most companies are looking to interim strategies to protect their workforce options. In fact, a third of business executives say they’re looking to hire immediately, while ‘availability of skilled personnel’ continues to be a top concern from the survey.” said Tom Hood, the AICPA & CIMA’s executive vice president for business engagement and growth.

“This illustrates the unique pressures companies have been under the past year, with so much uncertainty clouding financial modeling,”

he full report can be downloaded in the below link:  https://www.aicpa.org/professional-insights/download/1q2023-aicpa-business-and-industry-economic-outlook-survey

Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.

0 comment
0 FacebookTwitterPinterestEmail
Real Estate

Real estate inventory levels ‘shockingly low’: Re/Max Canada

by Bailey Amber
written by Bailey Amber

THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY

Subscribe now to read the latest news in your city and across Canada.

  • Unlimited online access to articles from across Canada with one account
  • Get exclusive access to the National Post ePaper, an electronic replica of the print edition that you can share, download and comment on
  • Enjoy insights and behind-the-scenes analysis from our award-winning journalists
  • Support local journalists and the next generation of journalists
  • Daily puzzles including the New York Times Crossword

SUBSCRIBE TO UNLOCK MORE ARTICLES

Subscribe now to read the latest news in your city and across Canada.

  • Unlimited online access to articles from across Canada with one account
  • Get exclusive access to the National Post ePaper, an electronic replica of the print edition that you can share, download and comment on
  • Enjoy insights and behind-the-scenes analysis from our award-winning journalists
  • Support local journalists and the next generation of journalists
  • Daily puzzles including the New York Times Crossword

REGISTER TO UNLOCK MORE ARTICLES

Create an account or sign in to continue with your reading experience.

  • Access articles from across Canada with one account
  • Share your thoughts and join the conversation in the comments
  • Enjoy additional articles per month
  • Get email updates from your favourite authors
0 comment
0 FacebookTwitterPinterestEmail
Business

Survey shows the majority of employees value productivity amidst financial pressures

by Bailey Amber
written by Bailey Amber

Employment Hero, a platform for managing people, has recently published its Talent Insights Report 2023. 

The report highlights that a significant majority of Australian workers, approximately 57 per cent, feel that their wages need to be keeping up with the increasing cost of living. 

However, despite this concern, a considerable number of employees, around 68 per cent, have rated their productivity levels as high over the last six months, indicating their determination to persevere.

The report also highlights that salaries in Australia have been fluctuating while inflation rates have continued to surge. Furthermore, around 54 per cent of the survey respondents reported that they had not received any salary increments in the past 12 months. 

Despite the recent influx of international workers into the Australian job market, job vacancies still remain high. It is noteworthy that in the face of global job uncertainties, the employment market in Australia still seems to favour job seekers, making it an employee market.

Based on a survey of more than 1,000 employees across Australia conducted in the initial weeks of January 2023, the Talent Insights Report revealed that over half of Australian workers, 54 per cent, did not receive a salary increase last year, potentially leading to the perception that their wages are not keeping up with inflation. 

For those who did receive an increment, it was, on average, seven per cent, which is similar to the inflation rate, with younger generations benefiting more. Approximately 52 per cent of employees aged 18-34 saw an increase in their salary, while 67 per cent of those aged 55 and above reported no salary increase. Additionally, employees between the ages of 25 and 34 were more likely to receive a cash bonus.

Despite a challenging global economic outlook in 2023, Australian workers remain optimistic about their professional futures. According to a recent survey, 71 per cent of Australians believe that their jobs are secure, and 44 per cent are confident that their companies will continue to grow this year.

While talk about the Great Resignation may have subsided, many Australians are still seeking career advancement and are actively looking for new opportunities. In fact, 63 per cent of employees who plan to switch roles are looking to make a move within the next six months. Additionally, 44 per cent of workers are eager to pursue career growth by seeking their next role in a different organisation.

One of the key drivers for this job-seeking behaviour is a desire for continuous learning and upskilling. Australian workers are seeking opportunities for personal and professional growth, with 36 per cent expressing a desire for their next role to be a promotion or lateral move within their current organisation – a significant increase of 29 percentage points from 2021.

Ben Thompson, Co-founder and CEO of Employment Hero, said: “The past two years have challenged managers and leaders to lead their teams in a fast-paced environment. Businesses must continue to keep up with the evolving working future or risk being left behind. The employee experience is now more important than ever – instilling a more holistic approach that acknowledges the full range of job seekers’ expectations needs to be implemented in the work culture.”

Mr Thompson continued: “With the worker shortage crisis looking to continue, small business owners need to overcome hiring challenges by shifting the lens of recruitment and retention of employees. To attract job seekers in the midst of a shortage of talent and a looming recession, companies need to adjust to an increased schedule of work flexibility, increased wages, and opportunities for professional growth and wellbeing.” 

“Despite the challenges, small businesses can be well placed to win the war for talent if they have a clear plan in place to strengthen their EVP. Actions can send a strong message to potential employees about the workplace culture, and it is important that they recognise the genuine intention to respect and protect staff through flexible working conditions.”

“Companies cannot afford to ignore the values of flexible working and the impact it has on productivity rates. Job seekers are feeling more empowered with their growing options, and employers need to take the initiative to be compatible with changing expectations,” he said.

The report will be available to download here https://employmenthero.com/talent-insights/

Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.

0 comment
0 FacebookTwitterPinterestEmail
Personal Finance

Half of Ontario insolvencies filed by millennials

by Davies Otwell
written by Davies Otwell

Insolvencies are up 15% from last year and a younger generation is leading the way

Published Feb 13, 2023  •  3 minute read

23 Comments

Total Ontario insolvencies rose by 15 per cent in 2022 year over year while Canadian filings rose by 11 per cent.
Total Ontario insolvencies rose by 15 per cent in 2022 year over year while Canadian filings rose by 11 per cent. Photo by Getty Images/iStockphoto

Reviews and recommendations are unbiased and products are independently selected. Postmedia may earn an affiliate commission from purchases made through links on this page.

After the pace of insolvency filings fell during the pandemic, it is now back on the upswing, with millennials leading the pack in 2022.

Story continues below

Millennials accounted for 49 per cent of total insolvency filings in Ontario even though they only make up about a quarter of the 18-and-over population, according to the latest Joe Debtor report from Ontario-based insolvency firm Hoyes, Michalos & Associates Inc. Total Ontario insolvencies rose by 15 per cent year over year while Canadian filings rose by 11 per cent and were notably higher than pre-pandemic levels.

“The average insolvent millennial is just 33 years old, yet they are 1.7 times more likely than baby boomers and 1.4 times as likely as generation X to file (for) insolvency, relative to the population,” licensed insolvency trustee Ted Michalos said in a press release. “We’ve noticed an overall trend since 2016 that the average insolvent borrower continues to get younger, with student loan debt and extremely high-cost loans being the main drivers of their insolvency.”

Story continues below

Millennials weighed down by heavier student debt loads

Millennials owed an average of $47,283 in unsecured debt last year, largely driven by student debt loads. More than one in three millennials were carrying student debt worth an average of $16,725, representing about 30 per cent of their total unsecured debt load. Post-secondary education debt has become a greater strain on younger generations as the cost of college and university has grown.

This generation was also the only age group to have a rise in unsecured debt, which grew by about nine per cent in 2022. They also heavily leaned on credit cards to cover rising expenses with 87 per cent of millennials holding credit-card debt with an average value of $13,948. The taxman also hit millennials harder, with nearly half of them grappling with tax debt, up from 37 per cent in 2021. Some of the tax debt was owed to repay pandemic support measures such as the Canadian Emergency Relief Benefit.

Story continues below

The problem with rapid high-cost loans

Millennials have also flocked to loans with outsized rates, with more than half of them carrying at least one extremely high-cost loan — such as a payday loan or high-interest line of credit — with average balances totalling $11,940. Over half of insolvent debtors had at least one rapid loan, as subprime credit players such as payday lenders expanded their services into longer-term credit options and high-cost instalment loans became one of the limited options for desperate low-credit borrowers.

Hoyes, Michalos & Associates pointed out that these kinds of loans typically carry a minimum interest rate of around 29.99 per cent and that can rise as much as 59.99 per cent when fees are added.

Story continues below

The buy now, pay later trend is also coming home to roost for many of these borrowers. The fintech option for retailers that allows consumers to buy a product and pay in instalments has become an easy-to-access source of debt with a simple application process, no need for collateral and easy approval standards. While convenient, borrowers are often left with punitively high rates and extra charges should they fall behind on payments.

The biggest concern for insolvency trustees such as Doug Hoyes, co-founder of Hoyes, Michalos & Associates, is the rapid pace at which the demand for these loans have grown.

“Despite subprime lending being a small component of overall lending in Canada, its fast growth is creating a crisis among heavily indebted borrowers and these rapid loans are a significant driver of consumer insolvencies,” he said.

Story continues below

  1. Canadian business insolvency filings grew 37.2 per cent in 2022.

    Households and businesses struggling to manage rising cost of debt

  2. Setting joint financial goals, like saving for something you can enjoy together within the next six months, is a good way to get on the same page financially.

    5 steps to stop feuding financially with your partner

  3. Only 44 per cent of Canadians are confident they will have enough to retire as planned, the study said, a 10 per cent decrease from 2020.

    Canadians now expect to need $1.7 million to retire

 Back with a vengeance

Even though household debt climbed during the pandemic, Hoyes, Michalos & Associates noted that insolvency filings fell as Canadians working from home managed to bulk up on savings and government supports. They also benefited from delayed wage garnishment (which legally forces a portion of your wages to be turned over to creditors through a court order) and collection activity, which was halted when courts were closed. Now, the economic reopening and the challenge of making ends meet in a high-inflation, high-interest rate environment are bringing those debt loads back to the fore.

• Email: shughes@postmedia.com | Twitter:

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Join the Conversation

Related Stories

  3. Story continues below

0 comment
0 FacebookTwitterPinterestEmail
Real Estate

Toronto home sales forecast to fall to level not seen in two decades

by Bailey Amber
written by Bailey Amber

TRREB also predicts prices will rise this year, but will still be lower than in 2022

A real estate sign outside a home in Toronto.
A real estate sign outside a home in Toronto. Photo by Peter J. Thompson/National Post

Home sales in the Greater Toronto Area (GTA) will decline to their lowest level since 2001 this year despite a rebound in the second half, according to annual forecast from the Toronto Regional Real Estate Board (TRREB).

Story continues below

The group’s market outlook, released on Feb. 10, said home sales will decrease to a total of 70,000 sales in 2023, down from 75,140 in 2022 and 121,712 in 2021. The total would be the lowest tracked on the TRREB MLS system since 2001, when 67,612 sales were recorded, according to historical data available on the group’s website.

The outlook also predicts the average selling price will reach $1,140,000 for all home types combined, up from current levels, but four per cent lower than the average price of $1,189,912 in 2022.

While TREBB’s chief market analyst, Jason Mercer, said the first half of the year will feel similar to the fall of 2022 due to the lingering effects of higher borrowing costs and related economic uncertainty, the second half will see an increase in demand for ownership, thanks to lower fixed mortgage rates, a relatively resilient labour market and record immigration.

Story continues below

“It will be a year of two halves in 2023,” Mercer said in a press release accompanying the report, adding that the flat-lining of sales and average selling prices suggests “we’ve reached a bit of a bottom in the market.”

Mercer also said that the expectation that borrowing costs will remain the same, or even trend lower, compared to the previous year, will help with affordability, especially for homebuyers who have been sitting on the sidelines.

TREBB’s report cites an Ipsos study showing a slight increase of two per cent in overall buying intentions compared to last year. Ipsos said 28 per cent of respondents indicated they will consider purchasing a home in 2023. As for first-time homebuyers, its polling said almost half of the respondents said they would likely buy a home, up seven per cent from its previous survey.

Story continues below

Those likely to list their townhomes this year were also up compared to last year, while listing intentions for condominium apartments and semi-detached houses were similar to 2022, it said. Detached home listings, on the other hand, appear to be trending lower.

  1. A pedestrian walks past real estate listings in Toronto.

    Housing inventory to recover later this year after drop in new listings

  2. At least 20 per cent of residential real estate was owned by investors at the beginning of 2020 in each of the five provinces tracked.

    Investors own a big chunk of Canada’s housing market. Should we be worried?

  3. Office buildings in downtown Toronto.

    Toronto’s office sublet inventory hits record high as businesses look to shed space

As for supply, the annual review said there were 152,873 new listings in 2022, down 8.2 per cent from the prior year.

New home sales, meanwhile, which began in 2022 at a near record pace, are expected to conclude the year with one of the lowest yearly totals on record, it said.

Story continues below

Total new homes sales shrank by 44 per cent for the first 11 months of 2022 compared to a year earlier, dampened by cumulative interest rate increases and elevated inflation.

Single-family new home sales were at unprecedented lows of July through September 2022, with annual sales at their second lowest level ever. Citing a study by Altus Group, TREBB’s report said single-family sales were a drag on total sales with a 67 per cent decline due to supply shortages and affordability issues, which it expects to remain factors in 2023.

Last year, Toronto topped the home sales in the GTA with 27,769 sales, while Peel Region followed with 14,167 sales.

• Email: dpaglinawan@postmedia.com | Twitter:

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

0 comment
0 FacebookTwitterPinterestEmail
Real Estate

Toronto home prices are down 14% from a year ago, sales down 44%

by Bailey Amber
written by Bailey Amber

Rising interest rates continued to hit the Greater Toronto Area real estate market in January as the composite benchmark price tumbled 14.2 per cent and home sales fell 44.6 per cent from the same month a year ago.

On a month-over-month basis, figures released by the Toronto Regional Real Estate Board on Feb. 3 show the GTA’s composite benchmark price fell by 0.23 per cent to $1,078,900 from $1,081,400 a month earlier while the average price of homes sold dropped to $1,066,668 from $1,099,125. Property sales barely moved in January 2023 compared to December 2022 with 3,110 and 3,100 sales reported, respectively – an increase of 0.32 per cent month over month.

New listings, meanwhile, were down 3.69 per cent to 7,688 from 7,983 in January 2022. The board noted that although the Bank of Canada’s overnight rate increased in January, longer term interest rates have declined, suggesting some relief may be in store when it comes to affordability.

Along with changing borrowing trends, Mercer believes that interest rate hikes are likely on hold for the foreseeable future, something that could stoke demand.

“The Bank of Canada has suggested that we’re going to see no further rate hikes as we move through 2023,” Mercer said in an interview. “I think it may prompt some homebuyers who are kind of on the sidelines waiting to see which direction things are gonna go to start moving back into the marketplace, particularly in the second half of this year.”

While January’s rate hike means that current variable rate holders will be coughing up more money each month, the BoC’s decision to pause could mean mortgage rates have peaked, Mercer said.

“I think more importantly, when you think about the market over the medium to long term, it does signal that your rate hikes are going to be at least on pause or perhaps even done for this cycle,” Mercer said. “You’re actually starting to see your medium-term rates and five-year fixed mortgages start to trend lower and so I think from a homebuyer’s perspective, it gives them a little bit more certainty about where borrowing costs are going to be.”

TRREB’s data shows that the largest year-over-year sales decline occurred in the condominium sector at 52.7 per cent from a year ago. At the same time, detached homes saw the largest average price decline — dropping 23 per cent since January 2022.

None of the housing types recorded by TRREB saw gains in sales or average prices over the month of January 2023.
• Email: shcampbell@postmedia.com

0 comment
0 FacebookTwitterPinterestEmail
Real Estate

A single word from the Federal Reserve chair fuels hopes of lower mortgage rates in Canada

by Bailey Amber
written by Bailey Amber

‘The disinflationary process has started,’ says Jerome Powell

Published Feb 02, 2023  •  2 minute read

8 Comments

United States Federal Reserve chair Jerome Powell.
United States Federal Reserve chair Jerome Powell. Photo by Elizabeth Frantz/Reuters files

U.S. Federal Reserve chair Jerome Powell only had to say one word in his Feb. 1 news conference to raise hopes that mortgage rates in Canada may be heading lower.

Story continues below

“We can now say, I think for the first time, that the disinflationary process has started,” Powell said following the Fed’s decision to hike its benchmark rate by 25 basis points to 4.75 per cent on Wednesday afternoon.

The key word — “disinflation” — was all markets needed. Stocks soared and bond yields tumbled as markets around the world anticipated that the Fed’s hiking cycle would end sooner rather than later, and might even kick into reverse, as the inflationary threat abates.

Mortgage strategist Robert McLister noted in a Mortgage Logic newsletter Thursday morning that Canadian five-year yields — a market closely traced in the setting of mortgage rates — quickly shed 10 basis points after Powell’s comments.

Story continues below

“That’s exactly what Canada’s mortgage market needs if there’s any hope of lower fixed rates by spring,” McLister wrote.

While he said it was too soon to see Wednesday’s decline show up in mortgages, he noted that sliding bond yields over the past three months have already been tugging down five-year fixed rates.

McLister said it would likely take longer than usual for those falling yields to work their way into mortgage rates given the current macroeconomic environment, as banks pocket some of the improvement to buttress against downside risks.

“As we head into recession, lenders will keep their spreads wider than usual to account for perceived risk and other factors,” he said by email. “They may have to deal with higher default rates, less liquidity in funding markets, and more rate volatility (which increases hedging costs).”

Story continues below

He said short-term fixed rates will edge down as the Bank of Canada comes closer to cutting rates, while variable rates won’t drop “materially” until a cut becomes official.

And he added that there is no doubt markets expect rates to come down.

“If you looked at the bond market, specifically things like overnight index swaps, forward rates and futures, there’s no question that financial markets expect lower rates by the end of this year,” he said.

  1. A condo building is seen under construction surrounded by houses in Vancouver, B.C., on Friday March 30, 2018. Canada's banking regulator is expected to make an announcement regarding the interest rate used in a key stress test for uninsured mortgages this morning. THE CANADIAN PRESS/

    Homeowners now better positioned to weather a downturn than a decade ago, report argues

  2. Tougher mortgage qualification rules threaten to push bank loans out of reach for homebuyers.

    Credit unions that offer homebuyers way around stress tests set to grow

  3. Canada's vacancy rate hit 1.9 per cent for purpose-built units in 2022 — down from 3.1 per cent in 2021.

    Housing affordability woes have spilled over to rental market, CMHC report finds

“As we speak, markets expect five-year bond yields — a key driver of five-year fixed rates — to be 42 bps (basis points) lower in 12 months.”

The Federal Reserve chair’s comments were interpreted as dovish even though he also indicated more rate increases were coming, and that cuts were unlikely this year.

Last week, the Bank of Canada lifted its key policy rate 25 basis points to 4.5 per cent, but signalled that it would pause future hikes to give higher rates a chance to percolate through the economy.

• Email: shcampbell@postmedia.com

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

0 comment
0 FacebookTwitterPinterestEmail
Real Estate

Credit unions that offer homebuyers way around stress tests set to grow

by Bailey Amber
written by Bailey Amber

Provincially regulated credit unions aren’t bound by OSFI’s mortgage stress test and homeowners have taken notice

Published Jan 27, 2023  •  6 minute read

6 Comments

real estate sign is shown in Calgary.
Tougher mortgage qualification rules threaten to push bank loans out of reach for homebuyers. Photo by Jim Wells/Postmedia

There’s a multi-million-dollar corner of Canada’s financial system where a stringent “stress test” imposed by the Office of the Superintendent of Financial Services was never adopted. It’s already attracting homeowners seeking an easier path to qualify for a mortgage amid rising interest rates and it’s poised to grow further as the spectre of even tougher mortgage qualification rules threaten to push bank loans out of reach for homebuyers.

Story continues below

Provincially regulated credit unions such as Meridian and DUCA are not bound by federal rules, and can choose whether or not to apply OSFI’s strictest qualifying standards for uninsured mortgages, subject to any rules adopted by their provincial regulators. 

While the credit union sector has chosen not to widely promote so-called “contract-rate qualification” mortgages — where borrowers are assessed based on actual interest rate they will pay rather than OSFI’s stress test — figures released by Canadian Credit Union Association show the lenders have been steadily picking up business, growing their mortgage books by 4.1 per cent in the second quarter and two per cent in the third quarter of 2022.

Rob McLister, a mortgage analyst and strategist, estimates that hundreds of millions of dollars’ worth of mortgages have been underwritten using contract-rate qualification.

Story continues below

“Speaking with (executives) at some of these credit unions, the message is that they’ve seen considerable growth in products like contract-rate qualification mortgages,” McLister said. “But that growth is coming off a small base because it’s a small market to begin with.”

Whether the credit unions decide to press their advantage, especially if additional measures tighten lending standards for the banks, remains to be seen.

Those new measures, proposed by the federal banking regulator in January in a consultation aimed at addressing the impact of rising rates on households already steeped in debt, could add even more onerous loan-to-income and debt-service coverage restrictions to the existing stress test. Since 2018, OSFI rules have pegged the qualifying rate for an uninsured mortgage at the greater of the contract rate plus two per cent, or 5.25 per cent.

Story continues below

Bank and office towers in Toronto's financial district.
Bank and office towers in Toronto’s financial district. Photo by Peter J. Thompson/National Post

Any of the individual proposed additional measures would limit buying power for would-be homeowners, said McLister, who suggested some borrowers “will most definitely gravitate to credit unions that don’t adopt OSFI’s guidelines.”

Most credit unions in Canada are regulated in a distinct provincial and territorial system parallel to Canada’s big banks. There is much alignment, but also regional differences including the amount of deposit insurance on chequing and savings accounts. In 2012, the federal government paved the way for credit unions to expand beyond provincial borders to become federal financial institutions, but there was very little uptake.

Some credit unions and their regulators have mirrored OSFI’s most stringent mortgage qualification standards to date. However, others such as Meridian, the country’s second-largest credit union, still offer a contract-rate qualification mortgage with terms that were in place before OSFI updated its stress test in 2018.

Story continues below

“We offer contract-rate qualification mortgages in some instances,” said Teresa Pagnutti, senior manager of public relations at the St. Catharines, Ont.-based Meridian.

Like all the credit union’s lending programs, such loans are extended based on a “holistic and prudent review” including assessing a customer’s cash flow and borrowing capacity, she added.

Meridian offers contract-rate qualification mortgages.
Meridian offers contract-rate qualification mortgages. Photo by Peter J. Thompson/National Post

Meridian tells prospective buyers on its website that, as a credit union, it is “more flexible than banks when it comes to approving mortgages” and can help those who wouldn’t pass the federal stress test buy their dream homes by taking “income appreciation” and accelerated payment options into account.

Last year’s gains in mortgage volumes in the credit union segment of the market came as interest rates began to rise following an extended period of ultra-low rates.

Story continues below

The Bank of Canada announced three hikes to its key overnight rate in the second quarter of 2022, lifting it to 1.5 per cent before a monster 100-basis-point increase in July. By the end of the year, rates had climbed further, reaching 4.25 per cent, and the central bank announced another 25-basis-point hike on Jan. 25, 2023.

The credit unions’ gains were achieved even as the number of homes bought and sold was falling. Transactions in July, for example, came in 29.3 per cent below activity in July 2021, according to the Canadian Real Estate Association (CREA). Sales were down in roughly three-quarters of all local markets, led by large cities and their surrounding areas including Toronto, Vancouver and Calgary.

Story continues below

For those struggling to afford a home with interest rates well above where they sat for many years — even as house prices cool — going the route of a contract-rate qualification mortgage could be appealing.

Credit unions have added new mortgage customers even as the number of homes bought and sold fell.
Credit unions have added new mortgage customers even as the number of homes bought and sold fell. Photo by Paul Morden/The Observer

McLister said the contract-rate qualification formula alone gives a borrower between five and 11 per cent more buying power, depending on the lender and term and assuming a 30-year amortization.

His ballpark estimate that the size of the market is in the hundreds of millions of dollars, which he called “conservative,” is based on total annual mortgage originations at credit unions and the percentage of volume coming from contract-rate qualification mortgages, as extrapolated from data at a sample of credit unions. Though it’s a considerable amount of money, he noted that it represents a small corner of the roughly $450 billion in new mortgages underwritten each year.

Story continues below

Still, it’s a segment of the market that has drawn the attention of analysts at credit rating agency DBRS Morningstar. In a Jan. 10 report, they highlighted the differences at credit unions across Canada when it comes to adoption of OSFI’s strict mortgage underwriting guidelines.

DBRS noted that while most credit unions have underwriting practices that “emulate the spirit” of OSFI’s original stress test from 2012, some of them — notably in British Columbia and Ontario — have not updated the more “rigorous” test adopted in 2018.

Provincial regulators in Alberta and Saskatchewan, on the other hand, did follow the more rigorous test in OSFI’s guideline B-20 for credit unions in those provinces, a stance the DBRS analysts said they viewed “positively.”

Story continues below

Russ Courtney, a senior media relations officer at the Financial Services Regulatory Authority of Ontario, which regulates credit unions in Canada’s largest province, said the act that governs the member-owned financial co-operatives does not require prescriptive interest rate stress testing in residential mortgage underwriting. Instead, credit unions can determine the type of stress testing that is most appropriate for their individual mortgages and mortgage portfolios.

  1. Canada's banking regulator wants to ensure that homebuyers are able to withstand the costs of rising interest rates.

    OSFI leaves mortgage stress test unchanged as safety buffer against growing risk

  2. Bank and office towers in Toronto's financial district.

    Kevin Carmichael: Financial system can ‘absorb’ shock of higher interest rates, Canada’s banking regulator says

  3. None

    Bank of Canada comments offer light at the end of the tunnel for real estate, mortgage markets, experts say

Story continues below

“As such, each institution has its own approach, reflecting what is most appropriate for the characteristics of their residential mortgage business,” Courtney said, adding that FSRA closely monitors and assesses the activity and risk profiles of credit unions and performs its own internal stress tests on credit union mortgage portfolios.

He said the provincial regulator has not seen what it considers to be a “material” increase in the volume of residential mortgage business activity or in the risk profile of Ontario credit unions.

One reason for the muted uptake might be that, as the DBRS report noted, even credit unions that do not use OSFI’s strictest qualifying standard as a general rule must do so for some home loans if they hope to use mortgage securitizations as a source of funding available through programs available through the Canada Mortgage and Housing Corporation (CMHC).

Another factor that could be keeping a lid on the shift to credit unions is that few broker-channel lenders offer mortgages underwritten at the qualifying rate and the public is largely unaware they exist, according to McLister.

“Only a small percentage (of credit unions that offer them) promote contract-rate qualifying publicly or to third parties” such as brokers, McLister said.

• Email: bshecter@nationalpost.com | Twitter:

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

0 comment
0 FacebookTwitterPinterestEmail
Business

End of year slowdown: Job ads in Australia down 2.9 pct in December

by Bailey Amber
written by Bailey Amber

As the year 2022 came to a close, the job market in Australia experienced a contraction.

Businesses in Australia began winding down in preparation for the holiday season. However, this slowdown also has a ripple effect on the job market. In December 2022, the number of job ads in Australia decreased by 2.9 per cent when compared to November last year. 

Additionally, when compared to December 2021, the number of job ads in December 2022 had dropped by 8.3 per cent. These figures suggest that the job market in Australia may have slowed down or contracted in the latter part of 2022, particularly when it comes to job postings.

This could be attributed to various reasons, such as economic slowdown, increased automation, seasonality and other external factors. The decline was particularly noticeable in the Information and Communication Technology (ICT) and Hospitality and Tourism sectors indicating that these industries may be more vulnerable to fluctuations in consumer demand and seasonal shifts. Furthermore, the lack of work in these industries during the holiday season could reduce the number of employees.

According to Kendra Banks, the Managing Director of SEEK ANZ, the job market in Australia experienced a decline as the end of the year approached and businesses geared up for the holiday season.

Banks stated that job ad levels decreased during this time, and this decrease was particularly pronounced in the Information & Communication Technology (ICT) and Hospitality & Tourism industries. 

This suggests that these sectors may be more affected by seasonal changes and fluctuations in consumer demand. Furthermore, as the workload decreases in these industries during the holiday season, the number of employees may be reduced.

Banks acknowledged that this trend was concerning and that more analysis was needed to understand the underlying causes of the decline.

“Applications per job ad recorded a double-digit rise, indicating candidates are ready and willing to take up opportunities in the new year.

“Hospitality & Tourism roles have seen the greatest increase in applications per job ad, while workers in Trades & Services are heavily in demand.”

Advertisements down, and applications up

While job ad levels decreased, the number of applications per job increased by 10.4 per cent in December compared to November. This could mean that the number of unemployed or underemployed Australians was on the rise, and more people were coming off the sidelines and entering the job market. 

But it could also mean that job opportunities needed to keep pace with the number of people looking for work, leading to increased competition for the limited number of available jobs. As the new year began, many experts were left to ponder over the causes of this trend as they sought to understand the state of the job market.

Overall, the contraction of the job market in Australia in December 2022 highlights the need for ongoing analysis and vigilance regarding the job market.

It also serves as a reminder that while automation and technological advancements can lead to increased efficiency and productivity, they also have the potential to displace workers and disrupt the job market. Policymakers and organisations need to take a proactive approach to address the challenges posed by these issues.

Download the latest SEEK Employment data here.

Download the latest SEEK Advertised Salary data here

About the SEEK Advertised Salary Index (pdf)

Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.

0 comment
0 FacebookTwitterPinterestEmail
Personal Finance

Stocks, large purchases a no-go as Canadians get more pessimistic about finances: poll

by Davies Otwell
written by Davies Otwell

More felt their financial position deteriorated amid another interest rate hike and holiday bills

A pedestrian walks past festive lighting in Toronto, in December.
A pedestrian walks past festive lighting in Toronto, in December. Photo by Peter J. Thompson/National Post

Household sentiment soured in December, as holiday bills piled up and the Bank of Canada raised interest rates for the seventh time in 2022, according to a recurring poll that tracks consumers’ financial outlook.

Story continues below

The latest version of Maru Public Opinion’s monthly household outlook index (MHOI) — shared exclusively with the Financial Post — found that 29 per cent of Canadians felt their financial position deteriorated last month, representing an increase of five percentage points from November. Meanwhile, 11 per cent of respondents said their financial position improved, compared with 14 per cent the previous month.

“Coming off of a fairly pessimistic November, Canadians were a little bit more upbeat in early December due to a combination of those who are younger making financial adjustments for better savings, retail bargains for lighter budgets, and the festive season,” said John Wright, executive vice-president of Maru Public Opinion. “However, in the aftermath, they’ve returned to their November more negative sentiments, soured by the impact of higher interest rates, inflation, and gift buying bills that are coming home to roost.”

Story continues below

The survey was conducted Dec. 29 and 30, a few weeks after the Bank of Canada raised its benchmark lending rate a half point to 4.25 per cent. Maru’s index came in at 88 in December, down one point from November and well off the most optimistic result of 107, recorded in July 2021.

The baseline for the index is 100. A score below 100 indicates negative sentiment, while a score above 100 is considered positive. Maru, a subsidiary of global research firm Maru Group, comes up with its household index by asking a representative panel of about 1,500 people a series of questions designed to probe how they feel about the economy’s prospects over the next 60 days. Maru started tracking Canadian households’ outlook in February 2021.

Story continues below

Asked if the economy was headed in the right or wrong direction, 63 per cent said the latter, unchanged from November. However, the number of Canadians who said they believe that the economy will improve in the next 60 days fell two percentage points to 37 per cent.

Sixty-three per cent of respondents said they could muster two or more months’ of savings to cover an unexpected cost, down from 69 per cent from November. The number of respondents who said they were likely to make a large purchase such as a car or furniture declined six percentage points to 13 per cent in December, meaning 87 per cent were unlikely to make such a purchase in the next 60 days.

  1. Most food delivery and rideshare drivers in Canada are men.

    Canada gets first glimpse of gig economy in Statistics Canada data

  2. Employment in Canada rose by 104,000 jobs in December, and the unemployment rate declined 0.1 percentage points to 5.0 per cent.

    Interest rates headed higher after Canada’s job gains blow past expectations

  3. A Bank of Canada survey has found the demand for cash has actually increased.

    Apocalypse now? Canadians turn to cash as a hedge against chaos

Story continues below

Financial markets appeared to be off limits.

Sixty-eight per cent said they were unlikely to invest in financial markets “because now is not a good time to do so,” up from 61 per cent. The last time Canadians held a similarly negative view was in September 2022.

“When we do the next survey it will be a real telltale sign of where we are headed in the spring,” Wright said, as Canadians continue to juggle inflation and interest rates that have risen on a “hockey stick” curve.

The benchmark interest rate began 2022 at 0.25 per cent, making last year the most aggressive tightening of monetary policy in the Bank of Canada’s history. Policymakers said they spike in borrowing costs was necessary to control inflation, which surged to 8.1 per cent in June and was hovering around seven per cent in November.

• Email: gmvsuhanic@postmedia.com | Twitter:

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

0 comment
0 FacebookTwitterPinterestEmail
Newer Posts
Older Posts