Navigating Canada’s Mortgage Market in 2023 – Challenges and Opportunities
Canada’s mortgage market is undergoing significant changes in 2023, driven by surging interest rates. The recent Canadian Mortgage Summit brought together industry experts to discuss the challenges and opportunities in this evolving landscape.
Shifting Consumer Sentiment
The panel of top lending executives, chaired by Brenna Charles, Director of Business Development at FCT, highlighted the shifting consumer sentiment. Uncertainty regarding real estate prices and interest rate direction has created a “dark tunnel” for borrowers, making planning challenging. However, despite this, there remains significant activity in the market, particularly for needs-based transactions like upsizing, downsizing, and relocation.
A Bright Future for Mortgage Brokers
Sushanta Sen, Director of Sales at MCAP, expressed optimism about the future of Canada’s mortgage broker profession. He cited BMO’s return to the broker space as a testament to the sector’s resilience and prospects. Sen urged industry professionals to grow together and learn from current challenges, even as the next 12 months may be uncertain.
The Impact of Rising Interest Rates
The era of rock-bottom interest rates, which prevailed during the COVID-19 pandemic, has come to an end. The Bank of Canada’s decision to raise rates in response to soaring inflation prompted a shift from variable to fixed-rate mortgages. This transition has put significant strain on homeowners, with variable mortgages reaching their trigger rates, impacting both ongoing transactions and existing homeowners.
Evolving Investor Preferences
On the investor side, Canadians with Guaranteed Investment Certificates (GIC’s) are enjoying exceptionally high returns. Concurrently, a drop in flows into mutual funds indicates that Canadians are prioritizing immediate needs over long-term investments. HomeEquity Bank’s Damon Knights emphasized the importance of focusing on homes and day-to-day requirements in today’s financial landscape.
The Thriving Reverse Mortgage Market
The discussion also touched upon the growing interest in reverse mortgages, particularly among baby boomers. HomeEquity Bank’s Rene Quercia highlighted the potential for growth in this market, which currently makes up only a small fraction of the Canadian mortgage industry. With the target audience being individuals aged 55 and over, reverse mortgages offer a viable solution to retirees facing unexpected financial challenges in retirement, such as rising costs and necessary home renovations.
Canadian Mortgage Professional – September 27, 2023
