Semi-Annual State of the Housing Market Report
Canadians anxious about home-buying, unpredictable market and affordability: mortgage survey. Mortgage Professionals Canada (MPC) is proud to release the Housing Market Report: 2022 Year-End Consumer Survey and Outlook. The Year-End Consumer Survey and Outlook report is commissioned by MPC from Oxford Economics, a world leader in global forecasting and quantitative analysis. The report utilizes data collected from an online survey of over 2,000 Canadians across the country, issued in December 2022 and tabulated by MPC partner firm, Bond Brand Loyalty.
Canada’s housing market has undergone a dramatic shift since the middle of 2022, with home prices down and interest rates up significantly. We see this across the economy with GDP growth at zero in the last quarter of 2022 and new mortgages down among the chartered banks. There is broad anticipation for how the Bank of Canada will consider this in its interest rate decision March 8 (note, for the first time in a year, the Bank of Canada left its overnight target rate unchanged, keeping it at 4.50%).
That said Canadian homeownership demand remains strong. Close to 80 percent of respondents see real estate as a good long-term investment, virtually unchanged from previous surveys. The current market volatility underscores the value of speaking to a mortgage broker. A mortgage should be tailor-fit to meet the homebuyer where they are at and where they will be. It is fundamentally about the ability to pay.
“That’s where mortgage brokers play a key role. What we heard from Canadians is that close to half of first-time home buyers would work with a broker to help them navigate the largest investment of their lives.”
-Lauren van den Berg, CEO of MPC
Fixed vs. Variable
- As of the second half of 2022, 69% of all mortgages had a fixed rate (vs. 66% in 2021), while 25% had a variable rate (vs. 26% in 2021)
- 3-in-10 variable-rate holders are actively planning or considering a fixed-rate. Another third (35%) considered but decided against.
Interest rate forecast
- Looking ahead, we expect the Bank will hold the overnight rate steady at 4.5% through 2023 before beginning to ease to a neutral setting in early 2024.
- Stable mortgage rates and lower house prices could support mortgage demand in 2024 and ultimately improve housing affordability across the country.
- So far, mortgage delinquency rates have stayed low (just below 0.2%) across Canada, and survey results suggest that 74% of mortgage holders can afford payment increases of up to 10%.
After national housing prices rose by 8.5% in 2020 and 22% in 2021, record unaffordability along with tightening monetary policy put downward pressure on prices.
Looking ahead, expect the housing correction to continue into 2023 but affordability will support mortgage growth:
- We now foresee a more prominent 30% peak-to-trough drop in house prices by year-end 2023.
- In the near term, this decline will be supported by new national policies targeting affordability, such as prohibiting foreigners from buying Canadian real estate.
- Over the medium term, more robust growth in housing supply should help restore affordability and support mortgage growth.
- And, with higher rates on the horizon, many households will have to look for more affordable homes, which will help extend the robust recovery of the mortgage market moving forward.
By release MPC March 7, 2023.
Candace Perko, Mortgage Broker
