As millions of Canadian mortgages approach renewal in the near future, a shift in the market offers intriguing possibilities for prospective homebuyers in the Greater Toronto Area (GTA) Centre.
With the advent of COVID-19, homeowners experienced historically low mortgage interest rates, leading to reduced monthly payments. As the world begins to transition into a post-pandemic era, these rates are on a stark upward trajectory. Around one third of borrowers have noted an increase in their mortgage rates since interest rate hikes began in March 2022. Data released by the Canada Mortgage and Housing Corporation (CMHC) indicates that during the first half of 2023, over 290,000 mortgage holders renewed their agreements at a higher rate, indicating the germination of an upward trend.
This evolution in the housing market proposes an imminent flux affecting millions. By 2024 and 2025, it’s estimated 2.2 million mortgages will be up for renewal. This constitutes nearly half of all mortgages in Canada signed at rock-bottom rates. The CMHC estimates that average monthly mortgage payments could inflate by between 30 to 40 per cent as these mortgages reach their renewal period. This suggests an additional burden of roughly $15 billion CAD on household budgets nationwide.
As monthly payments rise, it’s anticipated that some homeowners, now distressed, may opt to sell their property to downgrade to a more affordable housing option. This has potential to inflate housing inventory and shift the market dynamics towards buyers. Higher levels of inventory, a drop in median sale prices, and an increased average number of days homes stay on the market are telltale signs of this impending change.
Canadian markets such as Toronto are potentially on the cusp of a buyer’s market, as real estate supply begins to outpace demand. Furthermore, a report from Royal Bank of Canada points to more favourable conditions for buyers in various Ontario markets. New data by the Canadian Real Estate Association reveals a drop in the sales-to-new-listings ratio to 49.5 per cent in October, marking a 10-year low. A lower ratio often suggests a shifting power dynamic in favor of homebuyers.
The GTA Center region, in particular, holds promising potential for buyers. As mortgage renewals amass, it’s expected that a larger inventory of homes will become available on the market. Future homebuyers aiming for property in the vibrant, richly-cultured heart of Toronto can expect more options and favourable prices.
However, we advise prospective homebuyers to approach the market with caution and patience. Tracking indicators such as inventory levels, average sale prices, and the amount of time homes stay on the market will provide valuable insights into market shifts. In these uncertain times, budget wisely, anticipate potential interest rate hikes, and understand your financial limitations.
The road to a homebuyer’s market is not a straight one, and each region will face its unique fluctuations. Yet for those considering property investment in GTA Centre, this could be a fruitful time to research and explore the burgeoning real estate opportunities available in one of Canada’s most dynamic regions.