HELOC Borrowing Makes A Return, Rising Nearly As Fast As Mortgages
2025 Housing Market? Canada Gets Ready…
Falling interest rates and new mortgage rule changes are set to bring borrowers back into the picture
The tide may well be about to turn in Canada’s housing and mortgage markets, with interest rate cuts spurring improved buyer sentiment and a recent jump in home resales.
Homebuyer caution continued to linger at the end of the summer despite two rate cuts by the Bank of Canada in June and July – but local real estate board data from October indicates prospective borrowers are increasingly ready to step off the sidelines.
What’s more, the prospect of further central bank rate cuts in 2025, not to mention impending new mortgage rule changes aimed at easing the path to homeownership, are raising hopes of a much busier 12 months ahead for the mortgage market.
A pickup in activity has already been seen in recent months – and that could potentially mean things gather pace earlier next year than usual, according to a top lending executive.
Grant Armstrong (pictured top), head, mortgage originations at Community Trust, told Canadian Mortgage Professional the new rules, which include an expanded rollout of 30-year amortizations and a higher insured mortgage cap, could have a significant impact on activity across the board.
“I think what you’ll see in 2025 is an early spring market,” he said. “I think you’ll see Canadians excited to get out there and look for financing. And the new regulations that have come out about the increased mortgage insurance, the new refinance products, the 30-year ams, will stimulate borrowers – and even if those borrowers apply and then don’t qualify to a prime lender, they’re not going to walk away from the home.
“They’re going to look for different ways to come up with different equity positions. They’re going to look at shared equity programs. And I think we’ll see that downstream impact on the alt lending industry.”
Removal of stress test for switching lenders welcomed
What’s more, the elimination of the stress test on uninsured mortgage switches at renewal is another measure that will provide welcome relief and a new slate of options to many borrowers, according to Armstrong.
The exact detail of that change has yet to be revealed – but it’s one that’s been broadly welcomed within the alternative lending space. “We’re looking at that to see how we can help borrowers at renewal, either looking to stay with Community Trust or looking to transfer to Community Trust,” Armstrong said.
“We’re looking at how this will help borrowers who are looking to graduate on their path from alt to prime, just really creating some new competitive landscape for borrowers. So we’re excited – but we’re going to probably take it a little bit slower and learn about how it’s going to impact the marketplace and see how it comes out.”
What other trends are set to play out in the 2025 mortgage market?
A growing trend in borrower types also shows no sign of fading in 2025: namely, the increasing prominence of multigenerational living arrangements.
The cost of housing has seen plenty of borrowers tap into equity for additional dwelling units (ADUs) in their property, either to house family members or for extra rental income. “Whether it be shared accommodation or a basement apartment, I think those types of clientele have really changed,” Armstrong said.
“The bulk of business is still single-family homes, single-family units, parents and children, but you’re starting to see more multigenerational as well.”
A bumpy ride for interest rates over the past two years saw the Bank of Canada embark on a series of rate hikes in 2022 and 2023 before finally starting to cut this year, with fixed rates also seeing unpredictable movement amid plenty of global economic turbulence.
With rates likely on a slow but steady downward trend next year, that could also play into a more stable outlook for home prices in 2025. “What we’ve seen in the market is consistent property valuation changes,” Armstrong said. “I do think 2025 will bring less volatility in values. I think you’ll see more stable property values.
“House pricing will probably return to its old normality of two, three, four, or five points up. Some markets will go up, some will go down, but I think you’ll see a more stable rise than what we’ve seen in Canada… moving into 2025 and 2026.”
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