Mortgage Market Predictions for 2025
As we approach the new year, mortgage experts are weighing in on what’s to come. Here are five key predictions that will shape the Canadian mortgage market in 2025:
1. Loan-to-Income Ratios Will Dominate Mortgage Discussions
The loan-to-income (LTI) ratio will continue to play a significant role in mortgage discussions. With many borrowers facing higher debt loads and expenses, lenders will focus on LTI ratios to ensure borrowers can afford their mortgages.
- Incomes Rising Faster than 4%: Most incomes are rising more than four percent annually, which should keep mortgage affordability from deteriorating further.
- Government Measures to Discourage Speculative Buying: Governments are taking steps to dissuade foreign and speculative buying, which will help maintain a balanced market.
- Population Growth Slowing Down: As population growth is being pared back, this should also contribute to maintaining mortgage affordability.
However, interest rates remain a significant wildcard for 2025. Despite these trends, it’s difficult to predict with certainty what the real estate market will look like in 2025.
2. Debt Levels Will Force Homebuyers Further Out of City Centers
Despite a slight decline in debt-service ratios, they are still near record levels. With non-mortgage debt loads increasing – particularly credit cards (+9.4%) and auto loans (+13.6% year-over-year) – many consumers will need to find cheaper accommodations.
- Increasing Debt-Loaded Consumers: As more consumers become burdened with debt, they’ll seek out homes in more affordable areas, often further from city centers.
- Work-from-Home and Hybrid Arrangements: With work-from-home arrangements still prevalent, middle-class Canadians are increasingly seeking new homes outside of big city cores.
3. Switch Volumes Will Soar
Payment shock awaits many Canadian mortgagors when they renew this year, with most facing rates 200+ basis points above their previous deals. To lower monthly payments, borrowers will comparison shop mortgage rates more aggressively.
- Lenders to Sharpen Renewal Rates: In an attempt to keep customers in-house, lenders will offer competitive renewal rates, which may prompt many borrowers to switch lenders.
- 1.2 Million Mortgages Up for Renewal: With such a high number of mortgages up for renewal, expect significant mortgage musical chairs.
4. Cross-Selling Will Drive Rate Competition
Deposit-taking lenders are increasingly willing to sacrifice upfront interest revenue in hopes of cross-selling other financial products.
- Bundled Pricing Not Illegal ‘Tied Selling’: Bundled pricing, where lenders offer a lower rate if you agree to other products, is not considered tied selling. However, many consumers mistake it as such.
- Monoline Lenders Face Competitive Pressure: This trend will put a competitive squeeze on lenders without other financial services to sell.
5. Mortgage Musical Chairs Will Continue
While the above predictions don’t go too far out on a limb, one thing is certain – 2025 will bring plenty of surprises.
Robert McLister is a mortgage strategist, interest rate analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Mortgage Rates:
The rates displayed below are updated by the end of each day and sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news.
Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.
Can’t view the charts? Try clicking here.
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