How COVID-19 Affected The Commercial Mortgage Market

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How COVID-19 Affected The Commercial Mortgage Market

The COVID-19 pandemic has caused great uncertainty in many aspects of the Canadian economy, including both the residential and commercial real estate markets. The commercial mortgage market has felt a drop in liquidity since the onset of lockdowns and social distancing measures caused by the coronavirus pandemic. Prior to the global COVID-19 reaction, the Canadian commercial mortgage market maintained high levels of stability and consistency. However, as lockdown measures spread throughout the country, the commercial market was one of the most severely affected sectors of the Canadian economy, seeing the largest downward shift in over a decade. Many commercial mortgage lenders were overcome with fear that borrowers might be forced to default on their payments and in turn, market liquidity quickly deteriorated. Some lenders even halted their lending activities entirely until the market found some stability.

Government COVID-19 Relief Programs

The Canadian government took precautions to help ease the potentially fatal impact that coronavirus could have on the commercial mortgage market. In March, as part of Canada’s Economic Response Plan, the Government of Canada launched a revised Insured Mortgage Purchase Program (IMPP) . This program allowed the government to purchase up to $150 billion in insured mortgage pools through the Canadian Mortgage and Housing Corporation (CMHC). Such a response was intended to maintain secure funding for banks and mortgage lenders and guarantee continued lending to Canadians.

The CMHC also launched the Canada Emergency Commercial Rent Assistance (CECRA) , which was designated to help small businesses stay afloat during the coronavirus pandemic. The program provided eligible commercial property owners with a loan intended to lower the rent owed by their small business tenants and meet the operating expenses imposed on commercial properties. This month, the province of Ontario also announced they will ban the eviction of any small businesses that qualified for the CECRA program until the end of August.

The Government of Canada also created a Business Credit Availability Program (BCAP) , designated to aid Canadian businesses in obtaining additional financing through Business Development Canada and Export Development Canada. They also launched the Canada Emergency Business Account which gave small businesses the ability to apply for an interest-free loan of up to $40,000.

These are amongst some of the programs that were launched over the last few months to stimulate the commercial mortgage economy and keep it from experiencing detrimental instability that could severely impact the lives of many Canadians. It is in part to the strong response to the coronavirus pandemic by the Government of Canada that many economy experts are feeling optimistic about the future of the commercial mortgage market.

Post COVID-19 Commercial Mortgage Market

Despite the challenges faced by the commercial mortgage sector, many experts are still optimistic it will be able to overcome the difficulties imposed by COVID-19 and come out as prosperous as ever. Afterall, the Canadian commercial market has prospered through many difficult economic downturns, such as the Dot Com Crash of 2000 and the Financial Crisis of 2008.

During the COVID-19 fight, many commercial businesses have been entirely devoted to handling internal operational issues and thus were not focusing on novel investment decisions. However, with very low interest rates, the commercial real estate market is expected to be a very attractive investment option as the economy begins its return to normal. It is unclear when the markets will normalize, but as Ontario enters Stage Two of their recovery plan, many Canadians remain positive a strong recovery will not be far down the road.

If you are interested in learning more about the current trends in the commercial mortgage market, Clover Mortgage can help you stay alert. Our team of experienced and knowledgeable commercial mortgage brokers have been keeping up with market trends and predictions for the duration of the coronavirus pandemic. It is our goal to help you create and actualize the most appropriate plan of action for your investment portfolio and get the most competitive rates while doing so.

Call the commercial lending division of Clover Mortgage at 647-340-8640 or email us at commercial@clovermortgage.ca to speak with a licenced mortgage broker who specializes in commercial mortgages and can help you build a successful investment strategy.

Resources For Government Funding:

https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

https://www.cmhc-schl.gc.ca/en/finance-and-investing/insured-mortgage-purchase-program

https://ceba-cuec.ca/

Rushi Parikh
Written By Rushi Parikh
"Empowering your dreams with personalized mortgage solutions tailored to your unique financial needs."