It’s all over the news—the cost of mortgages has been increasing—and some of the headlines have been scary.
According to recent data from credit bureau Equifax Canada, an estimated 34,000 households in Ontario missed a mortgage payment in the first quarter of 2024; that’s a 23 per cent increase from the same period last year.
Local REALTOR® Lisa Sandhar shares her thoughts on how buyers, sellers and homeowners can navigate these turbulent times. To start, she outlines some of the biggest reasons for the change.
“Aside from the obvious, like GDP and inflation, what we witnessed in 2020 when the world was essentially shut down due to COVID was extreme government intervention to avoid a global economic meltdown. The government and the banks—we saw the Bank of Canada cut rates to .25% in 2020—were quite literally giving away money,” she explains.
“This was not sustainable and the chickens are now coming home to roost, so to speak. People who bought homes in the height of the market, where bidding wars were commonplace and properties were selling $250,000 over asking with 13 offers, were getting 3-year fixed-rate mortgages at @ 2.75% and they are now seeing their rates double. Salaries haven’t kept up with this, so people are having to refinance or borrow on their HELOC. Banks are seeing this and are able to increase the rates due to supply and demand.”
The effect of the recent rate drop is nominal and it is estimated that many borrowers are likely to see savings of less than $100 after this first cut. “A drop of .25% isn’t significant enough for people to get too excited, although it does elicit some consumer confidence that it is trending downwards,” says the REALTOR®.
Her advice to homeowners is to stay the course and don’t do anything rash. Keeping your primary residence is paramount to Canadians, she says, so we will do whatever it takes to ensure our mortgage is paid. Sometimes this means cutting back on unnecessary expenditures.
In other cases, some property owners who have a rental unit are needing to sell because the rents are not keeping up with the increased mortgage costs. Other landlords try to up the rent by more than the CPI guidelines. Either way, renters are left bearing the brunt of the rate increase.
“This is making the housing crisis in our city more dire. If landlords can’t afford their mortgage doubling, in some cases they are asking their tenants to pay several hundred dollars more a month (the current CPI rent increase for 2024 is 2.5%) or they are putting their homes up for sale (and in some instances not selling them after the tenant vacates), which is not only unfair but contravenes the Residential Tenancies Act,” says Sandhar.
Lack of affordable housing continues to be a major issue, says the REALTOR®. “If you can afford home ownership, real estate maintains a solid ROI. If you are fortunate enough to be able to own a secondary residence and rent it out, be fair.”
You can reach REALTOR® Lisa Sandhar of Re/Max Escarpment Realty’s Smart Realty Team at 289-212-6808. You can also follow the Smart Realty Team on Facebook and Instagram.
