In early November, the Canada Mortgage and Housing Corporation (CMHC) published its Residential Mortgage Industry Report (RMIR) for Fall 2024, highlighting significant shifts in the Canadian mortgage landscape. For real estate professionals, these trends reveal both emerging challenges and potential opportunities.

Sluggish Mortgage Growth and Buyer Hesitation

According to the CMHC, Canadian residential mortgage debt climbed to $2.2 trillion by July 2024, reflecting a modest 3.5% increase year-over-year. This subdued growth highlights how higher borrowing costs and elevated home prices are keeping prospective buyers on the sidelines, as many wait for market conditions to improve.

However, with the Bank of Canada (BoC) implementing consecutive rate cuts since June, and especially with the 50-basis-point reduction in October, there is potential for renewed buyer activity. Real estate agents may see increased interest from buyers attracted by these lower rates. Being prepared to assist clients with the implications of these changes, such as potentially more affordable financing options, can be a valuable service as they explore re-entry into the market.

Changing Mortgage Terms and Borrower Preferences

A key trend in 2024 has been a shift toward shorter-term fixed-rate mortgages, with many borrowers opting for terms of three to less than five years instead of the traditional five-year term. More people appear to be demonstrating an interest in maintaining flexibility amidst an uncertain interest rate environment.

Renewals in 2025

Around 1.2 million fixed-rate mortgages, valued at over $300 billion, are set to renew in 2025. Notably, most of these were originally secured at rates at or below 1%, meaning borrowers will likely face significantly higher payments. This renewal wave represents a potential area of financial stress for some, and there may be the potential for more homeowners looking to sell or downsize, if refinancing is not feasible.

Slight Uptick in Delinquency Rates

The mortgage delinquency rate edged up slightly in 2024, reaching 0.19% in Q2 from 0.17% at the end of 2023. While still below pre-pandemic levels, this increase, along with rising delinquencies on other credit products, suggests heightened financial pressure on borrowers. This may result in an increase in sellers who wish to avoid delinquency through timely sales. Providing guidance and sensitivity to these clients can build trust and support their decision-making during challenging times.

Growing Interest in Investment Properties

One of the most notable shifts noted by CMHC, which is of particular interest to real estate professionals, has been the rise in investment-related mortgages. The share of mortgages for owner-occupied homes declined from 75% in Q3 2019 to 70% in Q3 2023, while mortgages for investment properties rose to 17%, up from 13% in 2019. This trend highlights a growing investor interest in real estate for rental and income-generating purposes.

For real estate professionals, the increasing interest in investment properties among buyers signals a shift towards a growing potential client base focused on income-generating options. There are emerging opportunities to work with these clients interested in starting or expanding their portfolios that real estate professionals with the right knowledge and experience can take advantage of.

Engaging with this investor-oriented audience requires a strong understanding of both the appeal and mechanics of rental income and long-term property appreciation. By staying informed on rental market trends and local regulations, agents can offer significant value to clients looking for profitable and reliable returns on their purchases.

Agents who invest time in understanding property management fundamentals and tenant regulations can further position themselves as knowledgeable advisors to clients entering the rental market. This expertise not only allows them to guide clients on practical aspects of investment, such as high-demand rental areas, but also equips them to advise on financing strategies and management considerations. By building this knowledge base, real estate professionals can position themselves to serve this growing segment of buyers focused on income and investment properties.

As the mortgage landscape evolves with shifting rates, buyer preferences, and growing investor interest, real estate professionals who stay informed can more effectively support their clients in making sound decisions. Whether advising on mortgage term choices, helping clients navigate renewals, or working with investors exploring new opportunities, agents who understand these trends can provide relevant insights and valuable guidance. By staying attuned to market developments, agents can position themselves as adaptable and informed resources in a changing market.