Canada’s Housing Market: A Rollercoaster Ride of Affordability
In the midst of the chaos that is the housing market in Canada, there seems to be a mix of good news and bad news for both existing homeowners and new buyers. While the country managed to avoid the dreaded mortgage cliff that would have burdened existing borrowers with higher payments, the measures taken to prevent it may only benefit new buyers temporarily.
Here’s what you need to know:
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Affordability Woes Until 2035
The outlook for housing affordability in Canada doesn’t look promising, according to a report by Oxford Economics. Affordability is not expected to return until 2035, painting a grim picture for those hoping for immediate relief. The introduction of rapid rate cuts and extended amortizations may seem like a short-term fix, but the long-term implications suggest that borrowing costs will eventually start climbing in 2026. -
Toronto and Vancouver: Forever Out of Reach?
For cities like Toronto and Vancouver, the road to housing affordability appears to be permanently blocked. While falling mortgage rates and extended loan periods might offer a reprieve early next year, the subsequent rise in home prices and borrowing costs are likely to erase any benefits. Slower population growth may provide some respite in slowing price escalations, but the road to affordability still seems to be a long and winding one. -
Bank of Canada’s Rate Cuts
The Bank of Canada is expected to implement further rate cuts in the near future, but the impact may not be as significant as anticipated. While variable rate borrowers may benefit from these cuts, fixed rate mortgage holders may not see much change in their borrowing costs. With expectations of the overnight rate dropping significantly by mid-2025, the pool of borrowers affected by these changes remains limited. - Stagnant Mortgage Rates and Future Projections
Despite the current decline in fixed-term mortgage rates, the forecast suggests that this downward trend may come to a halt. The average five-year conventional mortgage rate is expected to hover around the current levels until mid-2025, before starting to climb again in 2026. While this may not be ideal for borrowers, it indicates a stronger economy where inflation and economic output are on the rise.
In conclusion, the Canadian housing market is a complex ecosystem where short-term solutions may not always translate into long-lasting benefits. As we navigate the ups and downs of affordability and mortgage rates, it’s essential to keep an eye on the bigger picture and brace ourselves for the challenges that lie ahead.
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