Plus: Homebuyer sentiment could be shifting at last
The coming six to 24 months are set to mark an important point in the mortgage journey of scores of borrowers across Canada, with renewals arriving at a time of significantly higher interest rates than the years immediately before and during the pandemic.
Mortgage professionals gearing up for that impending flurry can maximize their opportunities in the market, according to nesto principal broker and co-founder Chase Belair (pictured top), by ensuring their renewal process is comprehensive and optimized ahead of what’s sure to be a busy period for brokers.
He told Canadian Mortgage Professional that clear communication with clients and a proactive approach throughout the process would prove essential for the broker community in the months ahead.
“For mortgage brokers, my advice would be to make sure that we’re really proud of our inbound renewal process, setting expectations upfront and maintaining diligent control over the transaction,” Belair said.
“Brokers who will execute this well can capture as many renewal opportunities as possible in this big renewal wave that’s coming, versus being an advice giver but not being in position to earn revenue from it.”
#BreakingNews: Canadian homeowners may face significant payment increases when renewing their mortgages unless interest rates decrease in the coming years, warns a Royal Bank of Canada report.https://t.co/DpvJ6Zat1M#MortgageIndustry #InterestRates #MortgageRates #Mortgage— Canadian Mortgage Professional Magazine (@CMPmagazine) October 30, 2023
Some relief for homeowners as Bank keeps rates unchanged again
While steep borrowing costs and higher interest rates are a reality of the current market, Canadian homeowners were provided at least some grounds for optimism last week with the Bank of Canada’s decision to leave its own trendsetting rate unchanged in its October announcement.
That marked the second consecutive month featuring a rate hold, an indication that the central bank is ready to wait and see how impactful its increases have been to date before deciding whether to start hiking again.
Speaking before a Senate committee alongside senior deputy governor Carolyn Rogers on Wednesday, Bank governor Tiff Macklem indicated that the forthcoming wave of renewals was a central factor behind its decision to leave rates where they are.
“One of the important reasons why we held our policy rate of 5% is that we know that those renewals are coming,” he said. “So we know that there’s more to come from what we’ve already done. That’s why we have a forecast for weaker growth.”
Belair said the Bank’s decision to hold rates steady was a positive one, and that its indication that demand and supply were beginning to balance out was “powerful language” for the central bank to use.
“We know that the shelter expense component of the data that they’re tracking is still very high. We know energy is still high,” he said. “At the end of the day, I appreciate the language the Bank of Canada used. I do think the pause was a good decision and one welcomed by many Canadians.”
Signs of optimism for Canada’s housing market
While the national housing market has been mired in a protracted downturn throughout 2023 – with the exception of a brief resurgence in the spring – there are some signs that homebuyer sentiment could be on the rise.
In September 2022, 69% of nesto customers were firmly in the “just looking” category with only 31% “ready to buy,” according to Belair. Most recently, though, there’s been a 10% year-over-year swing in borrower sentiment, with 41% of customers now ready to buy and 59% on the “just looking” side.
Over the past 18 months, the highest value that nesto has recorded in the “ready to buy” category was 47%, Belair said, meaning that current buyer appetite may be inching towards where it stood before the 2022 rate hikes.
“That’s positive when it comes to market sentiment. It tells me that there’s a lot of Canadians out there that are willing to buy, and they’re still prepared to buy – they’re just waiting,” he said. “One thing that’s going to help them out is they might have noticed a bit of increased inventory as of late, and we may see prices decline a little bit further before they rebound.”
The median purchase price across the country has also hit the $400,000 mark, about $100,000 lower than it stood in May of this year – but despite that decline, the elected downpayment amount in most cases has not fallen, Belair noted.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.