In last month’s Memo, interest rates were top of mind as we prepared for the Bank of Canada’s announcement to raise the policy rate to 5.0%. This month, rates continue to be a focus, and more specifically, lending rates. Today, we’re seeing pre-approvals for 5-year fixed mortgages in-and-around 5.99%.

Though we’re transitioning from a period of free money to a period of cheap money, we are certainly seeing an impact on consumer spending. Renovation projects have decreased as homeowners delay non-essential larger jobs, and I recently read an article about electric vehicles and how North American car dealerships have significantly more inventory of unsold EVs than ever before. Only last year, it was a near impossible task to secure a green vehicle, but when there is uncertainty, there is hesitation. This is the situation that we find ourselves in right now, and which I expect will continue until the Bank of Canada makes its next rate announcement on September 6th. 

In the meantime, the housing question that continues to arise pertains to the number of mortgages that are coming up for renewal in this era of higher lending rates. Someone may have locked in at 1.99% five years ago, and now they will have to renew their contract at 5.99%. This increase is not insignificant, and there is no doubt that market watchers are anticipating a glut of houses coming to market as owners feel pinched by the cost of borrowing. 

To that point, I’ve heard roughly 40% of low-rate mortgages have already come up for renewal, with many more due next spring.  Despite that, we have not seen a large jump in inventory. In fact, as of this morning, active listings across the Toronto Regional Real Estate Board are up just 0.3% from the same time last year…essentially unchanged.   

How can that be? Our insiders are suggesting that the banks have been given authority to do whatever they can to keep people in their homes. It will be handled case by case, but that could mean renegotiating at a 60-year amortization, for instance. Simply put, it is no one’s intention to allow owners that are financially stretched to lose their homes. 

On the surface, it makes sense to anticipate a bump in housing supply coming down the pipeline as Canadians are required to refinance. And, in another country, that could be true, but don’t expect to see that here. Our government doesn’t want people to be forced to sell their homes. I cannot overstate the importance of that message.  

As always, I would encourage anyone reading this to reach out to me at (416) 723-2383, or to contact a member of the Harvey Kalles sales team. We will be happy to provide clarity around what’s happening within the current real estate environment. We have been in business since 1957 and can help lend clarity around uncertain housing markets.