COVID-19 & Mortgage/LendingImpacts (as of this writing on 18 March 2020)
COVID-19 crisis has escalated very quickly and with little warning. Understandably, this is having significant economic impacts. As the crisis persists, businesses will have to rely much more on their lines of credit to maintain operations and payroll while revenues suffer. Fortunately, the joint Ministry of Finance, Bank of Canada and OSFI announcements introduced measures to assist.
Announcements by the Ministry of Finance, the Bank of Canada, and OSFI:
Minister Morneau announced a new Business Credit Availability Program, adding $10 billion of additional support financing, through Business Development Bank of Canada and Export Development Canada, to support Canadian Businesses.
The Bank of Canada lowered the overnight rate from (reduced March 4th 175 to 125 bps), and then 125 to 75 bps, to reduce the interest cost burden for businesses and consumers alike. Lenders consumer prime lending rate is now 2.95% (3.10% at TD).
The bank also increased its Government of Canada bond buyback program.
www.bankofcanada.ca/2020/03/opening-statement-130320/
OSFI reduced the Domestic Stability Buffer from 2.25% to 1%, thereby freeing up $300 billion additional lending capacity for Domestic Systemically Important Banks (D-SIBS).
www.osfi-bsif.gc.ca/eng/osfi-bsif/med/Pages/nr_20200313.aspx
All of these measures effectively increase the ability of lenders to lend, and for consumers and businesses to borrow through this lean economic period; all very prudent measures given the expected economic activity reductions. Hopefully, the growth of COVID-19 cases will soon begin to slow and confidence will return to the market. When consumers feel they can once again visit local businesses, the short term effect of the crisis should subside.
April 6 Stress Test Adjustments Suspended
In addition to the announcements increasing market liquidity, OSFI also announced it is suspending all changes to the proposed B-20 benchmark rate; the Minister of Finance also postponed the announced April 6th qualification change for insured mortgages. In short, until further notice, the Bank of Canada posted 5-year rate will continue to be used for stress-test mortgage qualification.
Contact Your Lenders to Discuss Borrower Difficulties and Options
Some customers may be in need of assistance or adjustment to their mortgage product as a result of these unusual economic times. In this event, I urge you to contact your lenders directly. Many lenders have options available to assist those who find themselves in short term difficulty. Supports exist. Whether the lender permits the borrower to skip a payment, defer up to 6 months of payments, or in some circumstances amend their amortization schedule, each lenderwillgenerallyhavesomeprovision to assist when necessary. The industry will work together to help as needed. I have a lender customer service list posted on my website and facebook page.
On March 18, 2020
The Prime Minister announced an additional set of economic measures to help stabilize the economy during this challenging period. These measures, delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, will provide up to $27 billion in direct support to Canadian workers and businesses.
Candace Perko
Mortgage Broker
Countryside Financial
www.countrysidefinancial.ca
