Changing mortgage market: How have brokers and borrowers adapted?

A cooler climate over the past year has seen a change of habits from mortgage professionals and their clients alike

Changing mortgage market: How have brokers and borrowers adapted?

The spring housing market may be nearing, with an end to the protracted cooldown of the last year in sight – but that doesn’t mean activity is expected to ramp up dramatically any time soon.

The impact of a series of interest rate hikes by the Bank of Canada seized the mortgage and housing markets during the past 12 months, shifting would-be buyers to the sidelines as a surge in borrowing costs largely cancelled out home price declines.

Against that backdrop, many mortgage agents and brokers adjusted their business strategies, having grown accustomed to a transactional approach based on sky-high volume and an inundation of calls from prospective homebuyers.

Getting used to picking up the phone and mining an existing book of business have set brokers and agents in good stead for when the market eventually picks up again later in the year, according to an Orangeville-based principal broker.

Dwight Trafford (pictured top), of The Mortgage Centre, told Canadian Mortgage Professional that an upside of the slowdown had been the opportunity it presented for agents and brokers to hone their craft and focus on cultivating and maintaining relationships.

“I’m sure if you talk to any mortgage agent or anybody in sales, when there’s a slowdown the smart people dig into the databases and really start building, working on the relationships that maybe they took for granted when things were hot,” he said.

“I think it’s a great opportunity for people really to fine-tune their businesses and get back to the basics and get set for a successful future – more so than when you’re just inundated with files and you don’t have time to really work on your business. You’re just working on your clients, and there’s a chance to get back into the basics and build relationships.”  

How are higher interest rates affecting housing affordability?

The mortgage market’s big shift since the first quarter of 2022 saw the borrowing landscape change dramatically for Canadians following the record-low-rate environment that prevailed at the height of the COVID-19 pandemic.

When the full implications for the Canadian economy of that public health emergency became clear in March 2020, the Bank of Canada slashed its benchmark rate to a rock-bottom 0.25%, heralding an era of access to cheap credit that helped fuel a housing market explosion.

House prices in the country’s hottest markets spiked during that boom, worsening an affordability crisis and presenting further challenges for first-time buyers already struggling to enter the market.

While little has changed on that front for new entrants to the market even as it’s cooled, many of those prospective buyers are also changing their approach in a manner that could prove beneficial to their purchasing aspirations, according to Trafford.

“Affordability is not what it was, but I don’t think it’s outrageous either,” he said. “I just think it has had an effect that people are now looking like, ‘I’ve got to buy something a little more reasonable to start, or I may not be able to be in the GTA [Greater Toronto Area] where three, four years ago everybody could afford to be in the GTA. Well, you can’t – you have to look outside.”

Is there good news for borrowers on the affordability front?

A measure contained in the federal government’s latest budget, meanwhile, could prove a boost to new buyers: the introduction of a tax-free savings account for Canadians hoping to purchase their first home.

That would allow up to $40,000 over five years (a maximum of $8,000 per year) to be deposited, tax-deductible, in a savings account, with withdrawals for a home downpayment also not subject to tax.

Trafford said the move seemed to reflect an increasing emphasis on improving affordability in the housing market on the part of federal lawmakers.

“It looks like the government is looking at more ways to help first-time buyers buy houses. That’s a good thing,” he said. “Obviously they can’t do anything about interest rates, they can’t do anything about house prices, but… they can add more vehicles for savings.

“And I also think they’re looking at affordable housing a lot more. I’m seeing more articles on affordable housing and how the government’s looking at trying to incentivize builders towards small projects for affordable housing. We definitely need that.”

What are your thoughts on the current outlook facing Canadian borrowers – and how have you adapted your approach in the current market? Let us know in the comments section below.