Impacts of the Silicon Valley Bank collapse, housing market correction and tax return tips: Must-read business and investing stories
Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Silicon Valley Bank has collapsed – now here’s the good news
The collapse of Silicon Valley Bank, one of the world’s most prominent technology financiers, marked the second-biggest bank failure in U.S. history after Washington Mutual in 2008. The shutdown by California’s Department of Financial Protection and Innovation sent shockwaves across global markets and left governments and tech CEOs scrambling to limit the impact of SVB’s sudden failure. According to David Rosenberg, major banks are continuing to tighten their lending guidelines and boost their loan-loss provisions, and Americans should be prepared for a period of deflation. Meanwhile, bond markets have made a dramatic reassessment of future rate moves by central banks, including that of the Bank of Canada, writes Darcy Keith. For Canadians looking to buy a home, renew their mortgage or borrow money, Rob Carrick says that the demise of SVB is the break you’ve been waiting for.
Flair Airlines has four planes seized for non-payment
If you have a Flair Airlines flight booked for summer travel, you may want to double-check your boarding pass. The Edmonton-based discount carrier had four airplanes seized last week for non-payment of US$1-million to Dublin-based Airborne Capital Ltd., Eric Atkins reports. Working with bailiffs, the leasing company grounded four Boeing 737s: two at Toronto Pearson Airport, one in Edmonton and one in Waterloo, Ont. Flair leases six planes from Airborne – two 737s have not been seized – and another five from Bank of China Aviation. Flair recently paid its arrears to the Bank of China, but failed to come to an agreement with Airborne.
Canada’s real estate correction, in inflation-adjusted terms
February’s housing report from the Canadian Real Estate Association indicated this is the steepest house price correction at the national level in decades. The typical home in Canada has fallen by $132,000, or 15.7 per cent since last February – even worse when you factor in inflation. In inflation-adjusted terms, national house prices have fallen nearly $168,000, a nearly 20 per cent decline. Meanwhile, bigger mortgages and higher interest rates mean ownership costs eat up 60 per cent of average household incomes now, compared with 44 per cent then, according to RBC Economics. Jason Kirby takes a closer look in this week’s Decoder.
Tips for filing your income tax return
Tax season is upon us, and Canadians are urged to file earlier due to an impending strike involving 35,000 Canada Revenue Agency workers. With that in mind, Tim Cestnick offers six tips to help you file your tax return properly. You may be entitled to some new credit or benefits, such as the first-time homebuyer’s tax credit (the base amount was increased to $10,000) or the home accessibility tax credit (eligible expenditures increased to $20,000). You may also want to look into whether you qualify for the new Canada Dental Benefit. Ontarians who booked a staycation in the last year can claim 20 per cent of eligible accommodation expenses, such as hotel or campground stays, up to $200 per person on their taxes.
Volkswagen to set up EV battery factory in St. Thomas
German auto giant Volkswagen announced this week that St. Thomas, Ont., has been chosen as the site for its first battery factory outside Europe, after considering locations in both Canada and the United States. As Adam Radwanski reports, this helps solidify Canada’s effort to position itself as a major player in electric-vehicle manufacturing. While details of the planned investment, including the dollar amount, haven’t been disclosed, a 1,500-acre swath of land near London has been designated for industrial development. Other possible destinations such as Windsor have already reached their capacity to support such projects because of recent EV-related commitments by Stellantis NV and LG Energy Solution. The workforce in St. Thomas, which has struggled to replace hundreds of jobs lost when Ford closed its assembly plant over a decade ago, is not stretched as thin.
Why the U.S. wants to ban TikTok – and what it means for Canadians
The Biden administration has threatened to ban TikTok in the United States if the social media app’s Chinese owners, ByteDance, refuse to sell their stakes. White House officials have grown increasingly concerned about the safety of Americans’ data. But a nationwide ban would face significant legal and societal hurdles, since TikTok is popular with over 100 million Americans and an app has never been banned in the country. We look at the bill currently being considered by Congress, the response from TikTok, how this ban potentially affects American content creators – and whether this could happen in Canada too.
Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.
Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.
Spring housing market predictions and what SVB’s collapse means for rates: This week’s top real estate stories
Here are The Globe and Mail’s top housing and real estate stories this week, with the lowest mortgage rates available in Canada today, commentary from our mortgage expert and one home worth a look.
What housing crash? What Canadian markets look like for the spring
Prospective home buyers held their breath in anticipation last year as real estate prices declined across the country, hoping to enter the market as prices would plunge. But the housing crash didn’t happen. A year after the Bank of Canada started raising interest rates, houses remain unaffordable, mortgages cost more, and homeowners are holding on to their properties, making real estate listings scarce. Erica Alini and Rachelle Younglai look at what to expect from the market this spring.
The collapse of Silicon Valley Bank could reverse interest rate hike trends
The U.S. Federal Reserve was widely expected to raise interest rates at its next meeting on March 22, but the sudden failure of Silicon Valley Bank (SVB) – the largest collapse of a U.S. bank since the 2008 crisis – has investors slashing their bets, Mark Rendell reports.
The bank’s failure is sharpening the tensions between fighting inflation and managing risks of financial instability, leading markets to believe the Fed will hold off on further interest rate increases to stabilize the economy.
Why the SVB collapse is the best news for mortgage renewals and homebuyers
The failure of SVB could ripple through the economy, but for now, fear is manifesting itself through a rush of money into government bonds. The rush to the market is raising prices and bringing down interest rates on bonds.
The cost of fixed-rate mortgages is heavily influenced by interest rates in the bond market, which makes this the best news in a while for anyone renewing their mortgage or buying a house, writes Rob Carrick. Plus, the fear of economic instability triggered by the bank’s failure could push central banks to lower interest rates sooner than anticipated.
Mortgage specials start arriving, just in time for spring
This week’s market news could lead mortgage rates to go on sale, writes Robert McLister.
Canadian home sales are up slightly as prices continue to fall in February
Home prices in Canada fell in February for the 12th month, but sales volume is rising slightly in a potential sign that buyers are adjusting to higher interest rates, reports Rachelle Younglai.
The Home Price Index, which adjusts for pricing volatility, reached $704,300 last month, a 1.1-per-cent fall from January and a 16-per-cent loss from last February, when values hit their record high, according to the monthly report from the Canadian Real Estate Association (CREA.)
Decoder: The hit to Canadian house prices is deeper than it seems
While February’s housing report contained signs that the market may be stabilizing, it also cemented this as the steepest house price correction at the national level in decades, reports Jason Kirby.
According to CREA data, the typical home price in Canada has fallen by $132,000 since February 2022, and the drop is actually worse once inflation is factored in. In real, or inflation-adjusted terms, national house prices have fallen nearly $168,000, a more-than-19-per-cent decline.
Home of the week: A Calgary home for the tech lover
The Crescent area of Calgary, just a 15-minute walk to downtown, offers stunning vistas and a mix of more traditional and newly built homes. The lot size is 28.9-by-120 feet, and the entire house is oriented toward the view: a modernist building with 13-feet high windows – made in Belgium – and outdoor spaces with built-in fireplaces.
On the very back of the house is a screened-in back deck and an office workspace. Sitting in the office, you can turn around and look straight through to the front terrace and beyond. “The idea was, wherever you are, you have a view to the downtown,” the owner said.
What do you think is the asking price for this house?
a. The asking price is $3,550,000.
When Kelly Laing spots an interesting real estate listing in Rothesay, N.B., a coveted suburb of Saint John, she texts her friends in the area: Is anyone else going to bid on that home?
“We found that when a good family home would come up there’d be, like, 10 people who put in offers,” said the 31-year-old marketing manager. “And then, after the offer is accepted, you find out eight of them are your friends.”
Competition is heating up across the country, in cities such as Chilliwack, B.C., and London, Ont., and in major urban centres such as Calgary and Toronto, as Canada’s housing market comes back to life with the approach of spring.
Prospective home buyers held their breath in anticipation through the second half of last year – and largely halted their searches – as residential real estate prices declined across the country following rapid interest rate increases by the Bank of Canada.
Some of them hoped the central bank’s quest to stomp inflation would send home prices plunging, making it easier, especially for first-time buyers, to enter the market. But the housing crash didn’t happen.
A year after the rate-hike cycle began, housing affordability remains near record lows, with costlier mortgages largely erasing the effect of lower home values. Federal lending rules are amplifying the impact of higher mortgage rates, further hobbling borrowers.
At the same time, many homeowners are loath to sell after the recent price declines, meaning real estate listings are scarce. The result is buyers scrambling to snap up something they can afford in their chosen market.
To be sure, this spring won’t mark a return to the feverish bidding of the COVID-19-era housing boom. In many markets, demand from real estate investors and wealthy out-of-towners from big cities has waned. Buyers are far more cautious about making offers above the asking price, purchasing properties sight unseen and waiving home inspections.
Yet multiple offers on a home are back, real estate agents across the country report. If you want to buy one, you must still act fast.
After eight interest rate increases, the Bank of Canada signalled at the start of 2023 it would hold off on further hikes as it waits for the impact of higher borrowing costs to work its way through the economy. That pause, along with data showing home prices are stabilizing and the arrival of warmer weather, is luring buyers back into the market.
Growing concern about the stability of certain corners of the financial sector could also add momentum to the housing market. The recent demise of Silicon Valley Bank (SVB) in the United States, which was linked to the impact of soaring interest rates, has spooked investors. For mortgage borrowers, it means less likelihood of further increases in fixed and variable mortgage rates.
Yet, in a stark departure from the pandemic, it is mostly local buyers who are venturing back into the market so far this year. In 2021 and early 2022, moneyed buyers from expensive cities such as Toronto and Vancouver flocked to suburbs and smaller towns looking for bigger homes and lower prices, ramping up competition in markets such as Chilliwack, London and Halifax. But now that home prices have plunged by between 10 per cent and close to 30 per cent in most of those areas, locals believe it’s their chance to get into the market.
In Chilliwack, where the price of a typical home dropped from a peak of $907,600 down to $677,600 in January, realtor Jason Sandhu said about 70 per cent of his buyers are now from the region. By contrast, in the first few years of the pandemic, 70 per cent of his clients were investors from Vancouver, Surrey and Langley, all more expensive areas.
The stream of buyers from out of town has also thinned out in London and Halifax, according to real estate agents there. Now, local buyers who sat out the real estate craze of 2021 and 2022 are coming back – with larger down payments to make up for higher prices and mortgage rates.
In Halifax, would-be buyers are seeking help from their families for home purchases, said Clinton Wilkins, who has worked as a mortgage broker in the region for 17 years. That phenomenon has been common in Ontario and British Columbia for years.
Buyers are adapting to the higher mortgage rates in Vancouver and Toronto as well, the two priciest real estate markets in the country. People are now looking for smaller properties or in less desirable neighbourhoods, said Faith Wilson, a realtor with Christie’s International Real Estate in the Vancouver region.
It helps that the interest rate increases did not translate into widespread job losses, said Debbie Penzo, a realtor in Toronto. With fears of a recession fading away, she said, people are eager to buy once again, she said.
Home prices, though, remain far higher than they were before the pandemic, even in the cities that saw steep declines last year.
In London, for example, residential real estate prices in January were down 27 per cent compared to their pandemic peak of February, 2022. Yet a typical home still costs 60 per cent more than it did in January, 2019.
In Halifax, where home prices started the year 10 per cent below their previous peak, the benchmark home price remains 70 per cent higher than it was four years ago.
And for buyers who need a mortgage, higher borrowing costs have largely erased the effect of price declines. In Vancouver, Calgary and Toronto, for example, buyers with a competitive five-year fixed mortgage rate, a 20 per cent down payment and 25-year amortization would have seen their mortgage payment shrink by around $50 a month or less if they’d bought in January compared to the market peak, based on local benchmark home prices.
Complicating the math further for buyers is the federal mortgage stress test, which mandates that lenders test borrowers’ finances to ensure they’d be able to afford interest rate increases.
“Home prices have not come down enough to make up for the stress test,” said James Laird, co-chief executive officer of financial product comparisons site Ratehub.ca, and president of mortgage lender CanWise.
When it comes to qualifying for a mortgage, higher interest rates have, in effect, reduced the amount home buyers can borrow from federally regulated lenders based on a given household income.
Current rules require lenders to ensure that mortgage applicants would be able to keep making payments based on the higher of a minimum qualifying mortgage rate of 5.25 per cent, or their contract rate plus two percentage points.
At the start of 2022, mortgage rates were low enough that most well-qualified borrowers were being tested against the 5.25 per cent stress test benchmark, according to data from Ratehub.ca. But with mortgage rates now hovering around 5 per cent, borrowers must pass the test based on a qualifying rate of around 7 per cent. This means they can borrow significantly less.
In the Saint John area, home prices have come down by about 10 per cent since last June. But Ms. Laing is still struggling to find a home for between $500,000 and $800,000 that fits her and her partner’s needs.
“You’d think out here that would go a long way and it really doesn’t,” she said. At least not for a four-bedroom home – the couple is planning to have children – in a kid-friendly neighbourhood close to stores and schools.
A home that would have been “just right” for them recently sold for over $900,000, far above the couple’s financial comfort zone. Fixer-uppers are going for well below that, but generally require such extensive work that Ms. Laing reckons the cost of renovations would send the couple over budget anyway.
In rural areas, it’s still possible to buy a large detached house on an acre of land for around $200,000, she said. But every time the couple checked out properties further afield, two questions kept nagging at them: Who would the kids play with? And how easily could the couple recoup their money if they had to sell the home to chase job opportunities elsewhere?
Ms. Laing and her fiancé both have fully remote jobs, but they want the flexibility to be able to move to pursue professional opportunities, she said.
So far, the home search has been far from what Ms. Laing expected after the couple moved to Rothesay, which is her fiancé’s hometown, from Toronto in the spring of 2020. They’ve been living at his parents’ home since then and looking for their own place to buy for the past couple of years.
But even after higher mortgage rates brought an end to the real estate euphoria of 2021 and early 2022, finding the right home at an affordable price remains a challenge, she said.
And so, nearly three years after moving east, Ms. Laing and her fiancé are still searching.
The challenge is that, for now at least, homeowners aren’t rushing to put up for sale signs.
Some homeowners accustomed to the record price increases of the past two years are reluctant to list following price declines. Some who would otherwise move to bigger properties aren’t putting their current homes up for sale because they can’t qualify for the mortgage they’d need to upsize. In Calgary, for example, last month marked the lowest volume of new listings for February in 17 years.
The dearth of housing inventory is stoking competition among prospective buyers, although the current market remains a far cry from the pandemic housing frenzy.
In Saint John, Lesley Oland, the real estate agent who’s helping Ms. Laing and her partner with their search, would often see 25 to 30 offers on a property in 2021 and the first half of 2022, with bids as high as $50,000 over asking. Now, she said, multiple bids for a home priced at market value generally involve two to 10 buyers, with offers going $5,000 to $10,000 over asking.
“And if a seller overprices, then he’s not gonna get any,” she said. “Now, people will wait.”
Buyers are also placing a variety of conditions on their offers.
In Oshawa, Ont., real estate agents Tania and Brandon Sheridan recommend that all prospective buyers make their offers conditional not just on their ability to secure financing but, if applicable, on their lender conducting an appraisal within that financing condition period, which is usually from three to seven days.
After a seller accepts an offer, the buyer’s lender will often order an appraisal to assess the value of the property. The amount the institution will lend depends on that assessment.
If the appraised value is below the agreed purchase price, the lender will offer a smaller mortgage, leaving the buyer in a bind. If they can’t cover the shortfall between the mortgage and that price, the deal doesn’t close. The buyer may lose their deposit and face additional penalties.
Making an offer that includes a clause about the appraisal, however, would allow the buyer to walk away during the conditional period.
That became an issue for some buyers last year, as the housing market was cooling off. A buyer and a seller would agree on a price and a period of a few weeks or months to close the deal. In the meantime, though, similar properties in the neighbourhood could sell at lower prices.
If the bank ordered the appraisal just before the closing date, lower-priced comparable sales could drag down the appraised value of the property, leaving the buyer in the lurch.
While the home prices declines have now stopped, Ms. Sheridan argues the appraisal clause remains an important additional safeguard for buyers and sellers.
“Right now, if you’re going into a bidding war and you’re overpaying for a property, then your appraisal matters, because if it’s lower, you have to come up with that buffer,” she said.
The ability to demand conditions without fear of losing out to other bids is a marked improvement so far this year compared to the past two years for buyers such as Ms. Laing, who knows all too well about the importance of a home inspection.
In September, 2022, she and her fiancé thought their search was over. After looking for a year-and-a-half, they’d found a newly built townhouse in the mid-$600,000s that seemed just perfect.
But the couple eventually pulled their offer after a home inspection revealed severe issues with the property.
“That made us realize that some builders were taking advantage of the COVID market,” Ms. Laing said. “They were throwing up these homes, building them for cheap [and] marketing them to people coming in from Ontario who didn’t bother getting an inspection.”
Having to withdraw the offer when she thought they’d finally found their dream home was a low in what had been a months-long emotional roller coaster, she said.
“There were tears shed.”
Buyers in today’s market may be wary of making rash decisions and paying too much but, like Ms. Laing, they’re motivated. That means when a good home is put up for sale, someone will snap it up quickly.
At the height of the market, said Ms. Oland, the Saint John real estate agent, you had to check out a property and put in an offer the day it was listed. Now, she said, you have “a couple of days” to put in an offer on coveted homes that are priced right.
In some areas, a supply of newly built homes is providing some limited relief to otherwise inventory-starved markets. In Toronto, for example, a record total of nearly 32,000 new condo units is expected to hit the market this year, according to data from condo research firm Urbanation Inc.
In Calgary, Nishant Kalia, 31, and Tanushree Holker, 30, said they’re seeing a good number of listings coming up in the real estate segment they’re targeting: newly built townhouses priced at less than $500,000.
Mr. Kalia, who works in recruiting, and Ms. Holker, an investment representative at a big bank, moved to Toronto from New Delhi in 2019, but decided to relocate to Calgary after falling in love with the city – and its more affordable home prices.
But there, too, competition from buyers is fierce. Unlike markets like Chilliwack, London and Halifax, where demand now largely comes from locals, Calgary is now a prime destination for out-of-province buyers. With benchmark home prices hovering just above $500,000 – compared to more than $1-million In Toronto and Vancouver – the city is becoming a prime destination for buyers moving away from Ontario and B.C., and for real estate investors looking for a cheaper price point.
Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, predicts the city’s home prices will soon be marching up if this trend continues.
Concern about a bounceback of demand and prices in the spring is why some buyers rushed to purchase in the dead of winter.
One of them was Ms. Laing’s 29-year-old sister, Krista Laing, who bought a condo in Oshawa in February.
“Let’s just do the opposite kind of what everyone’s expecting and, and maybe we’ll find a good deal that we won’t have to overbid or we won’t have to put multiple bids on,” said Krista, a municipal worker, describing the reasoning motivating buyers like her.
Those instincts proved to be correct. Just after she sealed the deal on the condo – a 900-square-foot, three-bedroom, two-bathroom apartment she bought for $475,000 – the market turned, according to Ms. Sheridan, the Oshawa real estate agent, who, along with her husband Brandon, assisted Krista in the purchase.
“The market switched, and it switched fast,” Ms. Sheridan said, recalling multiple offers becoming more and more common as February turned into March.
But while Krista dodged the competition by buying before spring, she still had to adjust her expectations to find something that would fit her budget.
“I kept hearing everything was down, I was hoping this was my time to get into a small detached home,” she said. But even after double-digit price declines, all such listings were going for $650,000 at least, which was far beyond her spending ceiling.
Even after settling for a property priced well below $500,000, Krista is working two side gigs – one doing snow removal in the winter and the other picking up extra shifts in a nearby municipality on top of her 40-hours-a-week government job in Oshawa – to be able to comfortably afford her mortgage.
Making ends meet with just her main job would be “extremely tight,” she said.
In Whistler, B.C., Jasmine Lorimer, a 34-year-old social media marketing entrepreneur, poured all of her savings into a $805,000, 396-square-foot condo in December. It took about $200,000 to cover a 20 per cent down payment and transaction costs for a property that is roughly the size of a two-car garage. But Ms. Lorimer sees the condo as her way into a housing market that had previously been utterly out of reach despite her solid income and six-figure savings.
“Once I found a place, I was pretty impulsive about it and just went for it,” she said.
For buyers who are still looking, the outlook is uncertain. Douglas Porter, chief economist with Bank of Montreal, warned until recently about the potential for the Bank of Canada to resume interest rate increases, should economic data – among them a resilient housing market – suggest that inflationary pressures haven’t sufficiently subsided.
But the recent collapse of SVB and Signature Bank has the potential to be a game changer for central banks, including the Bank of Canada. Now worries about the health of the banking sector could override higher inflation.
“It now seems unlikely that the Bank of Canada will be hiking further,” Mr. Porter said.
That’s good news for borrowers with variable mortgage rates, which are linked to the central bank’s trendsetting rate. At the same time, the crisis has rattled bond markets, pushing down bond yields, which affect fixed mortgage rates. The implication for borrowers who prefer to lock in mortgage rates is similar: Less upward pressure on rates.
Lower fixed mortgage rates could give buyers more confidence to borrow, once again lighting a fire under the housing market. And while more demand and rising prices could draw more homeowners back to the market to sell, the housing inventory is bound to remain tight.
Canada is on track to admit 1.45-million new permanent residents over the next three years, equivalent of 3.8 per cent of the country’s population. However, the pace of home building has slowed as developers pull back amid higher borrowing costs.
In Rothesay, Kelly Laing is still holding out hope this will be the year when she and her partner can buy a home, strike out on their own again and begin the next chapter of their lives together.
“I just have a really, really good feeling about it,” she said. But, after witnessing the excesses of the pandemic housing boom, she knows better than to let that feeling drive her decision-making.
“I don’t think it’s wise to potentially just buy a home to have a home,” she said. “We don’t want to be house poor.”
By Stephen Johnson, Economics Reporter For Daily Mail Australia
15:39 02 Mar 2023, updated 21:31 02 Mar 2023
- AMP said recent borrowers most at risk
- Many took out loans at record-low rates
- House prices expected to keep falling
Australians who took out a loan when Reserve Bank interest rates were still at a record-low of 0.1 per cent are the most at risk of being in mortgage stress, with house prices expected to keep falling until September.
Monthly repayments on a variable mortgage have surged by 42 per cent since May 2022, when the RBA started the first of its nine rate hikes.
Westpac, ANZ and NAB are expecting three more increases in March, April and May that would take the Reserve Bank cash rate to an 11-year high of 4.1 per cent – up from 3.35 per cent now.
This means Australians with an average $600,000 home loan would see their monthly repayments jump by another $283 to $3,567 – marking a 54.7 per cent surge in just a year.
What a 4.1 per cent cash rate by May means
$500,000: Up $245 to $2,973 a month by May, up from $2,737 now
A $1,051 or 54.7 per cent increase in a year from $1,922
$600,000: Up $283 to $3,567 a month by May, up from $3,284 now
A $1,261 or 54.7 per cent increase in a year from $2,306
$700,000: Up $330 to $4,161 a month by May, up from $3,831 now
A $1,470 or 54.7 per cent increase in a year from $2,691
$800,000: Up $377 to to $4,756 a month by May, up from $4,379 now
A $1,681 or 54.7 per cent increase in a year from $3,075
$900,000: Up $424 to $5,350 a month by May, up from $4,926 now
A $1,891 or 54.7 per cent increase in a year from $3,459
$1,000,000: Up $472 to $5,945 a month by May, up from $5,473 now
A $2,102 or 54.7 per cent increase in a year from $3,843
Monthly repayments based on a Commonwealth Bank variable rate on a 30-year loan rising to 5.92 per cent from 5.17 per cent now. This reflects Reserve Bank cash rate rising to 4.1 per cent, from 3.35 per cent. Annual increase compares 2.29 per cent variable rate in May 2022 when the RBA cash rate was at 0.1 per cent.
A Commonwealth Bank variable rate by May would rise to 5.92 per cent, up from 5.17 per cent now before the next rate rise, expected on March 7.
Just 10 months ago, Australia’s biggest home lender was offering variable rates of just 2.29 per cent for borrowers with a 20 per cent deposit.
AMP senior economist Diana Mousina said borrowers who took out a loan between 2020 and early 2022 – when RBA rates were at a record-low of 0.1 per cent – were most at risk of mortgage stress where they struggled to pay their bills.
‘These households have not had time to build prepayment buffers, have faced large declines in home prices, have had a very fast repricing of mortgage rates, are more likely to have taken out larger loans and were probably not stress tested for the current increase in interest rates,’ she said.
Australian household debt also makes up 189 per cent of income, a level higher than Canada, the UK, the United States, Germany and New Zealand.
‘This makes Australian households vulnerable to changes in home prices and interest rates, with the risk of mortgage stress increasing as home prices fall and interest rates are increased,’ Ms Mousina said.
Ms Mousina argued mortgage stress needed to be based on more than just who spent more than 30 per cent of their income on mortgage repayments.
She also looked at mortgage arrears, where a borrower is 30 days or more behind on their repayments, along with negative equity, where someone owes their bank more than their home is worth.
Sydney has been the worst affected capital city market with the median house price falling by 14.7 per cent to $1,217,308 in the year to February 2023, CoreLogic data showed.
Hobart’s equivalent values have dived by 12.2 per cent to $699,959.
But the expensive lifestyle postcodes on the far north coast of New South Wales have suffered the biggest annual falls since floods hit the area in early 2022.
Mullumbimby’s median house price has plummeted by 30.1 per cent to $1,011,547.
This was even more dramatic that Byron Bay’s 25.4 per cent decline, taking the mid-point house price back to $2,255,105.
Lismore suffered the worst of the flood devastation with its median house price falling by 24.8 per cent to $403,430.
Another flood-affected suburb in Brisbane, Rocklea, saw its mid-point house price fall by 13.3 per cent to $507,506.
CoreLogic economist Kaytlin Ezzy said property prices in the flood-prone suburbs of Brisbane and northern NSW were likely to take longer to recover compared with the aftermath of the 2011 floods.
‘Given the severity of this event, and the short timeframe between major flood events, it’s likely the current value declines across the Northern Rivers and impacted house suburbs in Brisbane could be more enduring,’ she said.
AMP is expecting Australian home values to keep falling until September, marking a 15 to 20 per cent decline from the peaks in 2022.
They have dropped by 9 per cent since peaking in April 2022, marking the biggest fall in CoreLogic records going back to 1980.
The Reserve Bank is expecting 880,000 fixed-rate mortgages to expire in 2023.
That means a borrower who took out an average, big bank fixed rate of 1.92 per cent in May 2021 faces moving on to a ‘revert’ variable rate of 7.43 per cent.
The fine print in these contracts stipulated borrowers would be moving on to a variable rate that was, on average, 3.33 percentage points above the RBA cash rate – and three of Australia’s Big Four banks are expecting a 4.1 per cent cash rate by May.
That means a borrower with an average $600,000 mortgage, on a 25-year term, would abruptly go from paying $2,518 a month to $4,251 – a massive 68.8 per cent surge, RateCity calculated.
AMP chief economist Shane Oliver said a higher 4.1 per cent RBA cash rate risked pushing Australia into a recession as more home borrowers struggled to service their mortgage – leading to house price falls.
‘The increasing risk of recession with much higher unemployment will weigh on demand with the risk that debt servicing problems for some home owners will start to also boost supply,’ he said.
Australia’s gross domestic product grew by 0.5 per cent in the December quarter but GDP per capita – or economic output for every individual – was flat, Australian Bureau of Statistics national accounts data showed.
Gareth Aird, the Commonwealth Bank’s head of Australian economics, said the economy was likely to suffer a per capita recession in 2023, despite immigrants returning.
A per capita recession is different to a technical recession – defined as two consecutive quarters of GDP contraction.
Australia last suffered a technical recession, as a result of high interest rates, in 1991.
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, infrastructure and data solutions, and Eurex Frankfurt AG, the leading European derivatives exchange, today announced that they have entered into a commercial partnership in which TT will offer direct access to the Eurex EnLight selective request-for-quote (RFQ) solution from within the TT platform.
Up until now, most activity on Eurex EnLight has taken place through the Eurex front-end platform. EnLight on TT will further reduce the time-to-market of price discovery from multiple participants, leveraging the large TT distribution network. With the TT solution, buy-side institutions, banks and others with larger scale execution requirements not suited for the central limit order book will be able to extend and accept quotes from specific market participants with which they have relationships, including market makers and inter-dealer brokers, directly from their trading screens.
Steve Stewart, TT EVP Sales – EMEA & Europe Region Manager, said: “We’re pleased to partner with Eurex on this ambitious project that gives our clients convenient new ways of managing their large-scale orders and participating in the exchange’s diverse product offering from within the TT platform. The largest financial institutions in the world rely on us for their mission-critical trading systems and infrastructure needs, and we are constantly exploring new avenues for helping them easily access new trading opportunities and achieve new efficiencies.”
Thomas Martin, Eurex EnLight Product Manager, said: “This new partnership breaks down entry barriers and provides easy access to all the operational advantages of Eurex EnLight. With direct access to Eurex’s vast membership base of liquidity providers, we expect this partnership will lead to increased market liquidity and volume growth. We’re excited with what this new offering will bring to the market.”
Eurex EnLight on TT will be available for all equity, equity index and fixed income options and corresponding futures traded on Eurex as well as for all foreign exchange (FX) derivatives. The integrated solution will be available on the TT platform by the end of 2023.
The fully automated EnLight solution replicates the core aspects of voice and chat trading to bring together buying and selling interest from market participants engaged in off-book trading. It provides users the advantages of straight-through processing and compliance controls, including automatic electronic price formation, data collection, audit trail functionality and timely information retrieval to meet Europe’s MiFID II and MiFIR best execution requirements.
Q2 Catalyst’s suite of digital solutions to help Encore Bank meet the needs of its commercial clients
Q2 Holdings, Inc. (NYSE: QTWO), a leading provider of digital transformation solutions for banking and lending, today announced that Encore Bank, one of the nation’s fastest-growing banks, has selected Q2 as its strategic digital partner.
Encore Bank – a commercially focused boutique bank with $3.4 billion in assets that serves customers in 20 markets across eight states – will deploy the Q2 digital banking platform, along with several Q2 Catalyst commercial solutions. Leveraging the Q2 digital banking platform’s extensive integration capabilities, Encore Bank will be able to grow its commercial lending, deposit and non-interest income business through a seamless digital experience that connects to its back-office processing systems.
“Technology has changed the game in banking, but it’s no longer enough to be a differentiator; it also needs to drive and deepen relationships,” said Encore Bank President, Chief Strategy & Growth Officer Burt Hicks. “We looked for a digital partner that was the best of the best with unmatched capabilities and competency. Q2 brings immense value and innovation to the table. Their team immediately aligned with our vision at the executive level, and we look forward to a long-term partnership.”
Encore Bank will leverage many of the digital solutions that are part of Q2 Catalyst, Q2’s suite of best-in-class commercial banking solutions, to deliver a modernized user experience to its customers. These solutions include Q2’s industry-leading digital banking platform that serves consumers, small businesses and commercial customers, Q2’s onboarding solutions for consumers and businesses and Q2’s best-in-class treasury management solutions, along with Q2 Treasury Onboarding™, Q2 Commercial Sales Enablement, Q2 ClickSWITCH, Centrix and Q2 Marketplace.
“Q2 Catalyst resonated with our team because it allowed us to solve specific challenges for our commercial customers, including the ability to onboard efficiently and the autonomy to manage day-to-day operations with ease,” said Nikki Pfleger, director of business banking solutions, Encore Bank. “We want to deliver a seamless digital experience and best-in-market treasury technology, all while providing capital to small and mid-sized businesses.”
Known for its concierge approach to banking, innovative technology and experienced bankers, Encore Bank offers a unique experience for its employees, partners and clients. Each Encore Bank location employs local people with local interests and a deep understanding of what makes each community great. They are committed to serving clients and the communities by forming deep partnerships with its customers, local nonprofits and philanthropic and community organizations.
Dallas Wells, senior vice president of Product Management, Q2 said, “Q2 is proud to partner with Encore Bank and work in lockstep with its innovative team to deliver solutions for every aspect of the commercial life cycle. Encore Bank is truly building something unique, and we are excited to partner with Encore Bank to help empower its growth trajectory and accelerate its digital roadmap.”
For more information about Q2’s best-in-class commercial banking suite, go to Q2 Catalyst.
Click here to learn more about the Q2 and Encore Bank partnership.
About Encore Bank
Headquartered in Little Rock, Arkansas, the Encore journey began in 2019 when three experienced Arkansas bank professionals moved to The Capital Bank, a small Little Rock bank established in 1997. With just seven employees, $160 million in total assets and a vision to build a different kind of bank, founders Chris Roberts, Phillip Jett and Burt Hicks rebranded that small bank to Encore Bank, and within three years, turned it into the fastest organically growing bank in the country. Today, Encore Bank has more than 300 employees, $3.4 billion in total assets (as of Jan. 15, 2022) and is operating in 20 markets across eight states. Encore Bank is a privately held, boutique bank with a commercial focus that couples highly experienced and talented bankers with innovative technology to offer unprecedented levels of service to its clients through a hospitality-inspired concierge approach. Encore Bank provides a full suite of financial products and services to businesses, business owners, professionals, their families and contacts with purpose, passion and precision. Additional information about Encore Bank can be found at www.bankencore.com.
About Q2 Holdings, Inc.
Q2 is a financial experience company dedicated to providing digital banking and lending solutions to banks, credit unions, alternative finance, and fintech companies in the U.S. and internationally. With comprehensive end-to-end solution sets, Q2 enables its partners to provide cohesive, secure, data-driven experiences to every account holder – from consumer to small business and corporate. Headquartered in Austin, Texas, Q2 has offices throughout the world and is publicly traded on the NYSE under the stock symbol QTWO. To learn more, please visit Q2.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230202005234/en/
Five Star Bank Expands its Commercial Lending Franchise in Central New York with New Syracuse Office
Five Star Bank’s
Larry Alampihas over 20 years of banking experience and serves as Commercial and Industrial Banker, assisting companies with their depository and borrowing needs. He previously worked at HSBC, First Niagara and KeyBank, and most recently served as Business Development Manager for CH Insurance. A graduate of Le Moyne College, he is also a loan committee member of the Greater Syracuse Business Development Corp. Thomas Breed, who has more than 30 years of local banking experience, serves as Commercial and Industrial Banker, assisting companies with all of their depository and borrowing needs. He previously worked for KeyBank, First Niagara, Citizens Bankand JP Morgan Chase Bankand is a graduate of Syracuse University. Andrew Marchserves as Commercial Real Estate Banker. The 34-year banking veteran joined Five Star from Solvay Bank and spent the majority of his career in the Central New Yorkbanking space at institutions including Berkshire Bank, M&T Bank, KeyBank, Community Bankand more. He is a graduate of Clarkson University. Sara Smithserves as a Senior Portfolio Manager for the team, handling the service needs of commercial clients throughout Central New Yorkand beyond. Smith, who previously worked at First Niagara and KeyBank, is a graduate of SUNY Oswegoand the class of 2016 of Leadership Greater Syracuse.
“As part of Five Star Bank’s continued growth and evolution, we’ve expanded beyond our historic rural Upstate New York footprint to serve metros like
Chief Commercial Banking Officer
For additional information contact:
W. Jack Plants II
Chief Financial Officer and Treasurer
2023 GlobeNewswire, Inc., source
First Business Financial Services : Chase Kostichka, Senior Vice President, Leading Commercial Real Estate Banking Team
BROOKFIELD, WI – January 18, 2023 – First Business Bank is pleased to announce that Chase Kostichka, Senior Vice President – Commercial Real Estate Banking, is leading our Commercial Real Estate team in our Southeast Wisconsin market as of January 1, 2023.
Chase succeeds Bob Bell, who over the last 10 years, has led our Southeast Commercial Real Estate group and helped us deliver exceptional results. Going forward, Bob will remain with First Business Bank in a business development role, providing continuity for our team and a consistent, high-quality experience for our clients.
Chase Kostichka has more than 15 years of experience in the financial services industry helping clients grow their businesses and avoid financial risk. His areas of focus include assisting commercial real estate and C&I relationships with financing strategies. Chase joined First Business Bank after spending seven years with M&I/BMO Harris Bank, most recently in the Correspondent Banking Division focusing on C&I clients. During that time, he also completed the Corporate Banking Training Program which involved credit training and exposure to various areas within the bank.
Chase graduated with a Bachelor of Science degree in Mathematics from UW-Stevens Point and was a four-year letter winner on the UW-Stevens Point Football team. He earned an MBA from Carroll University. Chase lives in the Delafield area with his wife and three sons and volunteers coaching youth sports.
About First Business Bank
First Business Bank specializes in Business Banking, including Commercial Banking and Specialty Finance, Private Wealth, and Bank Consulting services, and through its refined focus delivers unmatched expertise, accessibility, and responsiveness. Specialty Finance solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC. First Business Bank is a wholly owned subsidiary of First Business Financial Services, Inc. (Nasdaq: FBIZ). For additional information, visit firstbusiness.bank.
First Business Financial Services Inc. published this content on 18 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 January 2023 22:29:03 UTC.
Deutsche Bank’s Blue Water Fintech Lab has released its first commercial product, a robotic process automation platform for multi-bank data processing and reconciliation.
Rachel Whelan, Deutsche Bank’s Apac head of Cash management, says: “The evolving state of digital finance means business customers expect more modern technologies a part of their corporate banking engagements. Our new RPA solution allows clients to manage automated reconciliations and makes the business process lean and efficient. This is a first step in supporting our clients on their digital transformation journey.”
According to data from a pilot programme conducted with clients, the introduction of RPA saved 60-80 hours of manpower every month. The solution can process tens of thousands of financial documents at the same time, and significantly shorten reconciliation time from 2-3 days to within one hour. It also helps avoid data problems caused by manual entry errors.
Yi Zhu, head of china innovation and fintech products at Deutsche Bank’s Corporate Bank, says: “We listen closely to clients’ needs in rolling out fintech solutions. Adopting a two-step strategy from proof of concept (POC) to commercialization, we have successfully extended from bank channels to clients’ supply chains. It is our goal to create a win-win ecosystem between banks and enterprises by integrating resources and new technology.”