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This Week's Mortgage Market Update Contains:

• Mortgage lending tightens for self-employed, immigrants
• Limit on CMHC mortgages could tighten lending and slow housing market
• US construction spending rose 1.5 pct. in December with housing and government both up

This Week's Quotation:

“Change has a considerable psychological impact on the human mind. To the fearful it is threatening because it means that things may get worse. To the hopeful it is encouraging because things may get better. To the confident it is inspiring because the challenge exists to make things better.” - King Whitney Jr.

This Week's Highlights:

• Housing starts show strong increase in December
• Employment rises in December: unemployment rate also rises
• Inflation rate held at 2.9% in November

Mortgage lending tightens for self-employed, immigrants

It's going to be tougher for the self-employed, new immigrants and higher-risk borrowers to get a mortgage as concerns continue to mount over the state of Canada's housing market. CIBC's wholesale mortgage arm, FirstLine, quietly announced Tuesday that it will no longer accept new applications from "stated income" homebuyers who can't prove they have the annual net income to qualify for home loans. Read more....

Limit on CMHC mortgages could tighten lending and slow housing market

OTTAWA - A federal limit on the amount of loans Canada Mortgage and Housing Corp. is allowed to insure could lead to stricter lending conditions and a cooling of the housing market, TD Bank economist Sonya Gulati said Tuesday. "It may serve to tighten the housing market," Gulati said. CMHC had insured $541 billion in loans at Sept. 30, compared with $501 billion a year earlier and $514 billion as of Dec. 31, 2010. The limit was raised to $600 billion in total outstanding insured amounts from $450 billion in 2008. Read more....

US construction spending rose 1.5 pct. in December with housing and government both up

WASHINGTON - Builders increased their spending in December for the fifth consecutive month, ending a weak construction year on a hopeful note. Spending on construction projects rose 1.5 per cent in December after a revised 0.4 per cent gain in November, the Commerce Department said Wednesday That pushed spending to a seasonally adjusted annual rate of $816.4 billion, the highest level in 20 months. Read more....

"THIS WEEK'S HIGHLIGHTS"

Housing starts show strong increase in December

Canadian housing starts increased by 7.8% in December 2011 to an annualized pace of 200,200 units from 185,600 in November 2011 (previously reported as 181,200). The outsized increase in the pace of housing starts was mainly due to a 14.5% increase in the volatile urban-multiples component to 111,300, from 97,200 last month (previously reported as 95,300). This partially retraces the 22.8% decline seen in this component in November. Urban-single starts also rose but by a smaller 3.8% to 70,600. Rural starts decreased by 10.3% to 18,300. Urban starts increased in Atlantic Canada (52.9%), Ontario (35.3%), and Quebec (9.0%). In all three regions, gains were driven entirely by multiple starts, with single starts decreasing slightly. British Columbia and the Prairies showed an opposite pattern, with single starts increasing but large declines in the multiples component. Overall, housing starts decreased by 19.8% in British Columbia and 11.0% in the Prairies. Housing construction activity slowed in the fourth quarter of 2011 but only slightly: the average pace of housing starts in the fourth quarter of 2011 was 199,200 units, compared to 204,600 in the third quarter. Expect further moderation in housing starts with the forecast calling for a pace of 185,000 in 2012 and 183,000 in 2013.

Employment rises in December: unemployment rate also rises

The 17,500 rise in December overall employment followed declines in November and October of 18,600 and 54,000, respectively, and a 60,900 surge in September. The unemployment rate rose to 7.5% from November's 7.4% and reflected a 23,600 rise in the labour force following an 1,800 gain in November and a 13,800 decline in October. Employment growth on a December-over- December basis slowed to 1.2% in 2011 from 1.8% in 2010 reflecting part-time employment which dropped 0.3% in 2011 compared to a 2.6% increase in 2010. Full-time employment rose 1.5% in 2011 compared to a 1.6% gain in 2010. On a regional basis, the increase in employment was led by a 15,700 rise in Ontario with the unemployment rate dropping to 7.7% from 7.9% in November. British Columbia saw a 10,700 increase and the unemployment rate held steady at 7.0%. In Quebec, employment plummeted by 25,700 sending the unemployment rate up to 8.7% from 8.0% in November. Employment in goods-producing industries rose 18,500 in December. A 900 drop in services largely reflected declines in finance, insurance and real estate (14,500) and health services (9,200). Employment in retail and wholesale trade was up 5,100 following the 34,100 plummet in November.

Inflation rate held at 2.9% in November

In November, prices for passenger vehicles as well as maintenance and repair costs rose. These gains were supplemented by rising prices for fresh vegetables, meat and fuel oil prices resulting in the headline rate rising 0.1%. Moderating the impact of these increases were falling costs for traveler accommodation, gasoline, natural gas and electricity as well as clothing prices. Prices for motor vehicles rose again in November by 3.4%. Clothing prices, which also posted consecutive monthly increases in recent months, declined in November by 4.7%. Compared to November 2010, prices for gasoline were up 13.5%. Vehicle insurance premiums were 4.4% higher than a year earlier while the price to purchase a passenger vehicle was 1.8% higher than in November 2010. Food prices posted a 4.8% rise. Mortgage interest costs, furniture prices and natural gas prices were lower than a year earlier. On balance, the annual inflation rates, both head line and core, held at October's 2.9% and 2.1% respectively. The annual core rate held at 2.1% for the second consecutive month and is projected to move below 2% in 2012. Both the headline and core seasonally adjusted indices rose 0.1% in November, a slower pace than the 0.3% and 0.2% respective gains recorded in October.