It has been an interesting year or so, hasn’t it? We have experienced volatility like no other period in my 20+ years in this business. The markets went from scorching hot in mid 2020 right through into early 2022 to what has seemed like a screeching halt overnight. But has it? Many fingers pointing to the catalysts as being rocketing rate increases at historical paces, short housing supply, and rising inflationary rates, to name but a few.
Oversaturated media coverage on current mortgage rates, housing markets, and Bank of Canada decisions have made Canadians quite familiar and fearful of terms than they might have in previous years.
“Trigger rates” and “overnight lending rates” have become normal parlance to Canadians as we collectively try to digest and process the information and warnings that seemingly come at a speed that can only be measured in nanoseconds.
There is no denying that we currently find ourselves in a market that is less lush than recent years but that really needs to be analyzed and fleshed out to measure its veracity. Yes, there is a lagging effect (for want of a better term) until the full impact of rising rates are felt but we should derive a reasonable level of optimism from the consistent ability of Canadians to demonstrate themselves as resilient.
Is it possible that we have bottomed out and are starting to see markets back on the rise? I argue that we have indeed. Valuations and sales activity are starting to climb, unemployment rates are solid, we welcomed 1M+ new Canadians last year alone (although faced with low housing supply), fixed rates have quietly been coming down, and the Bank of Canada has taken a pause on rates for a few months in a row.
These certainly do not cure real issues in the near term such as rising rents and affordability with the latter being the government’s mantra for quite some time now. They have failed miserably in that regard. Yet Canadians (particularly those of the younger vintage who are largely dependent on the bank of Mom and Dad) feel defeatist about never having a realistic shot to fulfill the dream of home ownership while current homeowners are short of breath for fear of significant mortgage payment escalations (seemingly) and loss of equity in their homes but even that is blown out of proportion. For instance, the media has often reported the doubling and tripling of fixed mortgage rates to be synonymous with the doubling and tripling of mortgage payments which is utterly erroneous. For example, an average mortgage at a 2% fixed rate would amount to a monthly payment of $1482 whereas the same mortgage at 5% (more than doubled the rate) will amount to a monthly payment of $2035. That is an increase of $553 per month (approx. $127 weekly). While that is not desirable it also does not signal the end of the world or financial ruin for prudent Canadians. We are resilient and wise. We will opt for less indulgences and return to what we deem as financial priorities. We will opt out of $8 coffees and do away with the extra night out per month to insulate against financial strain.
Look, we may not want to acknowledge this, but we have been absolutely spoiled by incredibly low mortgage rates for a great many years. We are not going to financial purgatory but rather we are recalibrating and normalizing, and we will do it sooner than most believe…at least that’s my view.
Fortunately, Canadians have mortgage brokers as an invaluable resource to help navigate through the complexities of markets that may appear overwhelming. They will provide guidance and counsel like no other while opening options and possibilities for borrowers.
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