The Canada Mortgage and Housing Corporation (CMHC) just announced their bi- annual Residential Mortgage Industry Report which offers critical insights into the Canadian housing and mortgage landscape. Let's dive into the key takeaways and what they mean for you, whether you're buying, selling, or holding real estate. 1. Mortgage Market Overview: The report indicates a slowdown in new mortgage activity, aligning with the decrease in overall home sales. Despite this, Canada is seeing a continuous rise in overall mortgage debt, primarily in the uninsured mortgage sector. The increase in uninsured mortgages most likely can be attributed in part to the increase in home prices in the last few years as purchases over $1M can not be insured. When looking at the increased debt loads payments have increased significantly for some, over 290,000 fixed renewals came up which those mortgage holders are having to grapple with the new rat interest rate environment. It's crucial to understand these trends, especially if you're considering entering or exiting the real estate market.
2. Increasing Mortgage Delinquencies: A significant aspect of the report highlights the stabilization of mortgages in arrears at historically low levels. However, there's an uptick in delinquencies for larger loans and in second- and third-stage delinquencies. This trend suggests some homeowners are facing challenges with their mortgage payments.
3.Risks and Vulnerabilities in Housing Finance: The document discusses the increasing risks and vulnerabilities in the housing finance system, exacerbated by high debt-to-income ratios among Canadian households, more than doubled interest rates since the previous year, and a significant share of mortgages with variable rates. Over 290,000 fixed-rate borrowers faced interest rate shocks upon mortgage renewal in the first half of 2023, adding to the financial pressure. Other credit products appear to be showing slight signs of potential debt issues.
4. Mortgage Market Segments: The traditional lending segment witnessed a slowdown in mortgage activity, but the risk profile remained stable. Conversely, alternative lenders experienced a less significant slowdown and increased their market share, albeit with a slightly increased risk profile. The report highlights a growing trend towards uninsured mortgages, partly due to regulatory changes and rising house prices, making more properties exceed the insurable limit.
5. Consumer Behavior and Preferences: There has been a shift in consumer behavior regarding mortgage preferences, with borrowers moving away from shorter-term mortgages in anticipation of continued interest rate hikes. The preference for fixed-rate mortgages, particularly for terms between 3 and 5 years, has grown, driven by concerns over further rate increases. And while on the topic of consumer behaviour’s. If you are concerned with a 2008 repeat that the next chart is for you, most of the reported arrears are with mortgage investments entities or otherwise “B” Lenders. All of the lenders are currently under the 2020 arrears rates, but with an upward trend. Most of the risk it appears in the market is taken on by the “B” Lenders and in the report it does indicate that the “B” Lenders have been taking quite a bit market share as of late as the bigger banks and Credit Unions have shifted their risk tolerance and sometimes not even offering renewal terms for home owners which is then forcing them to find the alternative financing at higher rates.
Understanding these trends is key to making informed decisions in today's market. Whether you're looking to relocate, buy, sell, invest, or renew your mortgage, it's essential to stay informed and plan accordingly. If you have any questions or need personalized advice, don't hesitate to reach out to us. Stay informed, stay ahead. What in the world can we do for you? Let us know. Mark and Maddie