Emerging Trends in Canada's Mortgage Market

Canada’s mortgage market keeps on changing and evolving as the economy sees various ups and downs, and faces the forces of various external factors. Here are some of the trends associated with the Mortgage Market.

Inflation Scare: Inflation in July stood at 3.7 per cent, according to data by Statistics Canada, which is well above the Bank of Canada’s (BoC) target of 2 per cent. The Bank has reassured that the inflation pressures should prove “transitory” and will subside soon, experts believe that an inflation scare is in the offing. Experts are of the opinion that as businesses face price pressure it will translate into higher inflation. If inflation continues to be high, markets may witness a rise in the 5-year bond yield, a key indicator for 5-year fixed mortgage rates. And if people get nervous about inflation remaining high, one could see this rate go up, and that would mean an increase in fixed-rate mortgages.

Dwindling consumer confidence: As the country is in the midst of a fourth Covid-19 wave, consumer confidence has gone down sharply since the early days of the pandemic.  If the “Delta” wave of the pandemic causes havoc, it would reflect on the economy and resultantly on housing. Nanos publishes a sub-index to measure the  people's perception of real estate performance and that has seen a steady drop-off in recent weeks. A lot of how people think will depend on the course of the virus.

Affordable housing will be a key election issue: As part of their election propaganda most major political parties have promised to make housing more affordable. The most common age to purchase a home is between 28-37 years. Add to that millennials now outnumbering boomers, affordable housing is bound to be one of the key poll issues. The politicians will be forced to look into the interests of the potential homebuyers. Since housing comprises a big chunk of the Canadian economy, politicians, despite wanting to make housing affordable, will be mindful to not topple the economy in doing so.

New regulations are likely: Due to the record increase in the mortgage debt over the last year, new mortgage rules and regulations may come up towards the latter half of the year or in early 2022. Experts believe that it wouldn't come as a surprise if in the future there are higher down payment requirements for secondary properties or other kinds of restrictions on eligible down payment, no borrowing from a HELOC, not being able to finance a primary property to buy another, be it an investment property or even a recreational home etc.

Other emerging trends include wealth inequality, as the renters witnessed a household net worth increase by $8,000 during the first three months of the year, versus homeowners who saw a whopping $73,000 rise.

If you have a question regarding the trends and risks in Canada's mortgage market or are a potential homebuyer who needs help with a mortgage, do write to us at LendX.