Key Trends for Canadian Homeowners
The latest trends in Canada’s residential mortgage market reveal shifts in borrowing patterns, rising delinquency rates, and a cautious approach from traditional and alternative lenders alike. Whether you’re a homeowner, or a prospective buyer, understanding these trends can guide smarter financial decisions.
- Interest Rates and Borrowing Preferences in Canada 2024
With interest rates remaining elevated, Canadian borrowers are increasingly opting for shorter fixed-rate mortgage terms of three to five years, anticipating rate cuts in the near future. Traditional five-year fixed-rate mortgages, once a standard, are now less favored, making up only 12% of new mortgages by mid-2024. Additionally, variable-rate mortgages have declined from 20% earlier in the year to just 9% by July 2024, reflecting changing borrower preferences as interest rates fluctuate.
- Canadian Mortgage Debt Growth and Household Debt Impact
Canadian mortgage debt reached a record $2.2 trillion in July 2024, marking a 3.5% increase from the previous year. While this growth is slower than recent years, it remains a notable factor in Canada’s high household debt levels. The Bank of Canada’s recent rate reductions are expected to stimulate borrowing, potentially accelerating mortgage debt growth in the coming year, impacting both new buyers and those renewing their mortgages.
- Rising Delinquency Rates and Financial Vulnerabilities
Mortgage delinquency rates, though still below pre-pandemic levels, are gradually rising, reaching 0.19% in Q2 of 2024. Delinquency rates on other credit products, including auto loans and credit cards, have also increased, suggesting potential stress on household finances. With over 1 million fixed-rate mortgages due for renewal in 2025—85% of which were secured at lower interest rates—the risk of further delinquency spikes looms large.
- Growth in Alternative Mortgage Lending in Canada
Alternative lenders have seen a resurgence, outpacing overall mortgage credit growth in early 2024. However, this segment is experiencing higher default and foreclosure rates, particularly among single-family properties. Although the top 25 Mortgage Investment Corporations (MICs) increased their assets by 4.9%, a rise in loan-to-value (LTV) ratios signals heightened risk. This trend suggests that borrowers who may not qualify with traditional lenders are turning to alternative options, but at a greater financial risk.
- Rising Demand for Investment Property Loans in Canada
The share of new mortgages for investment and rental properties continues to grow, reaching 17% in Q3 2023, up from 13% in 2019. With a high demand for rental properties, Canadian real estate remains a strong investment option. Conversely, mortgages for owner-occupied homes have seen a slight decline as investors capitalize on real estate opportunities, underscoring a shift in Canada’s housing landscape.
- Preparing for Mortgage Renewals in 2025: What Canadians Need to Know
The forecast for 2025 highlights significant renewal risks, especially for borrowers whose original mortgage terms were secured at historically low rates. With over 1 million renewals expected next year, many Canadians may face substantial payment increases, further testing household finances. Policymakers and financial institutions alike should remain vigilant, adjusting strategies to address the implications of rising debt and economic vulnerabilities.
Key Mortgage Trends in Canada, Fall 2024:
- Interest rates push borrowers toward shorter terms.
- Canadian mortgage debt grows to $2.2 trillion.
- Delinquency rates rise to 0.19%.
- Alternative lenders see increased risk.
- Investment properties drive mortgage demand.
FAQs on the 2024 Canadian Mortgage Market
What are the current mortgage trends in Canada?
Canadian borrowers are choosing shorter fixed-rate terms as interest rates remain high. Investment properties are gaining traction, and mortgage delinquency rates are slowly increasing, impacting financial strategies nationwide.
Why are mortgage delinquency rates rising in Canada?
The rise is due to a mix of high household debt and mortgage renewals at higher interest rates. As costs of living increase, more borrowers may face challenges in meeting their payments.
Is alternative lending in Canada a good option?
Alternative lending has seen growth, particularly for borrowers unable to qualify with traditional lenders. However, higher delinquency rates and increased loan-to-value ratios indicate a greater risk in this segment.
Our team of experts are here to guide you through the complexities of today’s mortgage market. For personalized advice and assistance in navigating these changes, feel free to reach out to our team anytime!
