According to the latest Residential Mortgage Industry Report, mortgage debt is seeing its slowest growth in 23 years, hitting $2.16 trillion in February 2024, up 3.4% from the previous year. Factors like high mortgage costs and uncertainty about interest rate decreases have softened home sales and prices. However, the slowdown in mortgage growth might be short-lived, as higher home sales and prices are anticipated in the coming years due to expected drops in mortgage rates, record-breaking immigration, and rising disposable incomes.
Despite the slowdown, many Canadians are feeling the financial strain, with Canada’s mortgage delinquency rates trending up for the first time since the pandemic. Delinquency rates rose to 0.17% in Q4 2023, up from a low of 0.14% in Q3 2022, indicating that the pandemic savings of many Canadians may be dwindling.
Mortgage arrears are expected to reach pre-pandemic levels by the end of the year, but favorable employment conditions in 2025 and tight housing markets should mitigate this increase. Borrowers are opting for shorter-term, fixed-rate mortgages over traditional five-year terms due to uncertainty in the mortgage rate outlook. Terms ranging from three years to less than five years represent nearly 40% of newly extended mortgages, while variable-rate mortgages account for 15%.
