Mortgage interest costs have undergone a ‘dramatic’ surge over the past year, having risen by nearly 70% as of the first quarter, according to Statistics Canada. Since the previous quarter alone, mortgage in
terest costs are up by 12.6%
As further proof that high interest rates are weighing on real estate, total mortgage debt in Canada grew by just $11.2 billion in the first quarter, marking the smallest increase in 20 years. The slowdown in the first quarter, comes despite an uptick in real estate activity in the early part of the year, and as the Bank of Canada continued to increase mortgage rates in January and again more in June.
How will the lack of housing inventory impact home prices in Canada?
The current supply-demand imbalance, means a further rebound in 2023 could play out mainly for prices, with lack of inventory having perhaps made the recovery appear stronger than it’s actually been. The experts are saying that you would actually expect it to be stronger than that, given the demographics, but there’s just such a limited supply that it’s all playing out on the price side.
In the last few months, the MLS home price index is up 2% in April, then 2% again in May. It is almost back to COVID-level growth. The demands’ only mediocre, but because there’s so little supply, for every one of those listings that comes up, you’re getting a lot of cases where more than one buyer shows up to compete for it.
The red-hot market that took place during the COVID-19 pandemic was mainly due to ‘churn’, with the biggest cohort of buyers being existing homeowners moving around – creating activity on both the sales and new listing sides. By contrast, the current market is seeing a lot of existing owners who might be expected to be more active holding fire, because their current mortgage and rate, are much more attractive than what they would get if they moved.
New listings remain low, then, because it’s not existing owners who are buying and then selling.
Original Articles: www.mpamag.com and www.canadianmortgagetrends.com
