As 2024 draws to a close, I’m writing on behalf of my colleagues across Ontario to sincerely thank you for entrusting your mortgage financing needs to First National. We very much appreciate your business and the opportunity you create for us to grow, which we did in 2024.
After surpassing $50 billion in the spring, First National’s commercial mortgage book continues to advance on demand for insured financing in the multi-unit residential space. Here in Ontario, our team remains very active in construction lending across our major urban markets, and we are seeing an increase in trading activity as more buyers and sellers find common ground. Generally, the average size of financings continues to increase, in part pushed higher by urban densification.
That’s not to say 2024 was without its challenges, bond market volatility being one. Just when it seemed bond yields were tightening, they recently widened as traders reacted to the latest economic news south of the border. Precisely because no one can predict interest rates, hedging will remain an important risk mitigant, which is why First National will continue to provide our Early Rate Lock program in 2025.
CMHC program changes, the latest round coming on November 15th, created additional complexity. First National summarized these revisions in a separate message at that time, but the one I would flag is the increased likelihood of rental achievement holdbacks for MLI Select construction mortgages. In introducing this change, the National Housing Agency signaled its intent to support borrowers but within a tighter credit box in some cases.
Since First National works with CMHC on a multitude of loan applications and our team gathers real-time data at the local market level, we are in a good position to anticipate their informational needs and advocate on your behalf. For those reasons, I urge you to speak to your First National advisor to proactively consider strategies that will address CMHC’s needs and, if appropriate, avoid rental achievement holdbacks and special construction bonding requirements.
Even with recent revisions, we remain firmly of the view that CMHC programs should be the first choice for multi-unit residential financings in 2025. But we are here to support you in other ways, including with the provision of conventional bridge and mezzanine financing, if the need arises.
First National’s official 2025 outlook will arrive in your inbox in January from Jeremy Wedgbury. In the meantime, rental rate trends and restrictions on the foreign student population (with its disproportionate impact on university towns in Ontario) will be on our headwind watchlist. On the bright side, there remains a significant housing shortage in Ontario that will not disappear any time soon. Working together, we can continue to make a positive difference for our communities and our own business prospects.
With thanks and best wishes for the holiday season,
Scott Mizzen
Regional Vice President, Commercial Financing, Ontario