Over the years, it has become a personal and pleasant tradition to write a brief note before the holidays to express my appreciation to you for doing business with First National.
With your support, 2024 has been an exceptional year in Québec, where demand for insured financing in the multi-unit property sector has been at record levels. We’re pleased to be the market leader in meeting this demand, which helped us surpass $50 billion in commercial mortgages under administration earlier this year.
In addition to thanking you for helping us get to this milestone (and well beyond), I also think it’s appropriate to offer some brief observations on the state of, and outlook for, the Québec market. Without exaggeration, this has been a rollercoaster year.
In the winter, the market was quiet and nervous as interest rates remained high. Then rates decreased starting in the spring, providing the catalyst for more trading activity and renewed optimism. That was not the end of the story. Bond yields rose again on continued strength in the U.S. economy and a surprise increase in Canadian inflation in October. Then, the federal government announced a GST holiday, which called into question the potential of another near-term rate cut. This caused bonds to rise further, but market sentiment changed once again on employment and per capita GDP readings in November with bond yields moving down on an anticipated Bank of Canada rate cut. That anticipated and welcomed 50 basis point cut came on Wednesday December 11th.
All of this volatility makes a strong case for interest-rate hedging using First National’s Early Rate Lock program to allow you to take advantage of large downward bond rate swings and protect yourself from volatile upward bond movements.
Monetary policy was not the only factor creating turbulence. On June 19th and again on November 15th, CMHC made several changes to its incentive programs. First National was quick off the mark to help many clients qualify for insured mortgages under the old rules prior to the June deadline. The most recent round of changes was not telegraphed to the market and while these were described in detail in a previous communiqué from my colleagues, I would add the following:
- CMHC has shouldered a significant burden over the past two years in supporting construction in the multi-unit sector and the changes made recently are designed to reduce their risk with conventional funding sources expected to make up the difference.
- CMHC’s decision to introduce Rental Achievement requirements for MLI Select loans in November is the most significant change and could mean construction projects that would otherwise qualify for 95% loan-to-cost funding will now receive 75% with the remainder contingent on meeting construction cost proformas and full lease ups. That 20% difference on a large project, the kind we often finance in the Québec market, is very meaningful.
Despite these policy revisions, we strongly believe in the value of CMHC incentive programs but qualifying for them requires considerable expertise, more now than ever.
Call on us
As a deeply experienced CMHC Approved Lender, the largest in our space in Québec, First National has the know how to navigate these rules and present the most compelling data to bolster your application in ways that may alleviate rental achievement requirements and position your project for maximum benefits. Plus, we can look at options for conventional bridge and mezzanine funds if the need arises.
Under the circumstances, it is critically important for you to speak to First National so that we can provide timely advice and effective solutions that meet your financing needs.
Continuity with Better Lending
One of the hallmarks of First National is continuity of approach and in good measure that is the result of the long-term dedication of our team. In a financing industry known for workforce turnover, the stability of our team enables us to move forward faster to provide you with Better Lending solutions.
I’m proud of my colleagues, inspired by their commitment, and thank them as I thank you for your friendship and confidence in us. Inevitably, 2025 will come with a new set of opportunities and challenges. Together, we will prevail.
On behalf of my First National colleagues in Québec and throughout Canada, I wish you the very best of the season.
Michael C. Williams
Vice President, Commercial Financing, Quebec and Atlantic Canada