Fall 2024 Residential Mortgage Industry Report: What Homeowners Need to Know

As we approach the end of 2024, understanding Canada’s mortgage landscape is essential for anyone navigating the housing market or holding a mortgage. The latest Residential Mortgage Industry Report highlights trends in mortgage debt, rising delinquency rates, and the shifting preferences in mortgage terms. Here’s what these developments mean for Canadian homeowners and prospective buyers.

1. Shorter Mortgage Terms are on the Rise

One major trend in 2024 is the shift toward shorter-term, fixed-rate mortgages (3 to 5 years). Over half of new mortgages in Canada now fall within this range. Why? With the expectation that interest rates may decline soon, many homeowners are choosing not to lock in a long-term rate. This means that if rates decrease, they’ll have the flexibility to refinance at a better rate in just a few years.

2. Mortgage Debt Growth Slows – But Vulnerabilities Remain

Mortgage debt in Canada hit $2.2 trillion in July 2024, growing at a slower pace of 3.5% year-over-year. Many Canadians have been hesitant to buy amid high borrowing costs, and mortgage growth has consequently slowed. However, elevated household debt still poses risks. With debt levels outpacing inflation, households may face tighter budgets if interest rates drop too slowly or if inflation resurges.

3. Delinquency Rates Are Rising, But Still Manageable

Mortgage delinquency rates (loans overdue by 90 days or more) reached 0.19% by mid-2024, with indications they may rise further into 2025. While delinquency rates remain below historical averages, they are increasing, partly due to rising debt costs. Other consumer credit categories, like auto loans and credit cards, have also seen higher delinquency rates, which could signal future challenges for the mortgage market.

4. Big Banks vs. Alternative Lenders: Risks in Different Segments

Traditional lenders (like chartered banks) saw fluctuations in mortgage risk this year, initially lending at higher risk levels but tightening standards in the second quarter. Meanwhile, alternative lenders, such as Mortgage Investment Corporations (MICs), saw faster growth in loans but with increased delinquency and foreclosure rates. This sector often serves borrowers who may not qualify for traditional mortgages, hence the heightened risk.

5. Renewals Coming at Higher Rates in 2025

A large wave of mortgage renewals is expected in 2025. Roughly 1.2 million Canadian mortgages will be up for renewal, most of which were initially set when Bank of Canada interest rates were below 1%. Many of these homeowners could face sticker shock as they renew at higher rates, potentially impacting monthly budgets. For anyone approaching renewal, it’s a good time to talk to a mortgage broker about strategies to manage these higher rates.

6. Growth in Investment Properties

There has been a notable rise in mortgages for investment or rental properties, with 17% of new mortgages in 2023 going toward non-owner-occupied homes. High rental demand and stable real estate values make these properties attractive to investors. However, this shift also means fewer affordable options for primary homebuyers, which could keep prices elevated in some markets.

How First Foundation Can Help

With so many changes, managing a mortgage today takes strategy and planning. At First Foundation, our team is here to help you navigate the shifting landscape. Whether you’re buying, refinancing, or renewing, our experienced brokers are ready to guide you through the options that best fit your financial situation. Get in touch with us to discuss how we can support your mortgage journey in the coming year!