Wave of mortgage renewals drives owners to list homes, analysts say
With many Canadian homeowners facing a sharp rise in mortgage payments, many of them have decided to bail, resulting in the highest number of Toronto housing units for sale in more than a decade and signaling a big drop in prices in the coming months.
In Toronto, a city where two-thirds of the country’s condominiums are sold, considered a bellwether for other big metropolitan areas, inventories have pushed past highs reached 10 years ago, data showed. At the same time, sales have lagged.
Rising inventories with anemic sales show a high degree of stress in Canada’s biggest property market, real estate consultants said. It indicates either a string of defaults or a price correction is in the offing.
Fueling the surge in available properties are homeowners and investors who bought houses and apartments five years ago at record-low mortgage rates, aiming to grab a piece of Toronto’s lucrative rental market.
But those mortgages are now coming up for renewal in an interest rate environment starkly different than it was five years ago. Mortgage rates are sharply higher, although the Bank of Canada has recently started to guide them down.
In Canada, mortgages are typically for 25 years and renewed every three or five years, in contrast to the United States, where homeowners can enjoy a flat rate for the entire life of a 15-year or 30-year mortgage.
Under current rates, many homeowners would have their mortgage payments double, according to a calculation by ratehub.ca, a website that compares mortgage offerings.
Next year, roughly C$300 billion ($219.33 billion) of mortgages at chartered banks will come up for renewal.
“Some of them are investors who now just want to walk away from their units because they can’t afford it,” said
Read more on globalnews.ca
