New data shows conditions tightened in April, even as brokers report cautious signs of life
Housing affordability worsened in 12 of 13 major Canadian cities last month, according to a new report by Ratehub.ca – and Toronto, one of the country’s most notoriously pricey markets, was among the areas that saw the average income required to buy a home increase.
Prices have been on the wane in that market in recent years amid a wider cooldown, but Ratehub’s analysis showed a slight increase in mortgage rates (and a tiny jump in average home prices) darkened the outlook for Toronto buyers in April.
That marks bad news for first-time buyers in a market where some positive signs have emerged over the past two years thanks to slumping demand and lower prices.
The slowdown in the city’s condo sector has weighed against the overall market performance during that spell and put downward pressure on property values, opening some doors for hopeful buyers previously frozen out during spells of rampant speculation and frenzied bidding wars.
Longer amortizations offer first-time buyers ‘breathing room’
Still, there are glimmers of hope for first-time entrants to the market – and some ways mortgage brokers have been helping them navigate affordability hurdles.
Among those has been the option to tap into expanded 30-year amortizations, a method that Toronto-based mortgage broker Marshall Tully told Canadian Mortgage Professional had been an important way of helping buyers ease the strain of monthly payments.
That option, launched in 2024, has seen plenty of uptake among newer buyers since its introduction, according to Tully.
“I think most clients that are buying and qualifying for that 30-year amortization are taking it – not so much to qualify, just more so to give themselves breathing room,” he said.
They might not necessarily even intend to draw out the mortgage over that long a spell, but like having the option of doing so.
“You have the ability to pay the mortgage off faster, but you don’t have the ability to slow it down once you’re in debt,” Tully said. “So most clients will opt for a longer amortization and then use prepayment privileges, lump sum or otherwise, to try and pay the mortgage off faster if they find they’ve got cash flow.
“But it’s a huge tool for first-time buyers that are getting into a home for the first time and not comfortable with what the expenses will be, to give themselves a bit of breathing room initially and then speed up if they can.”
Affordability pressures could start creeping up again
The outlook for buyers also tends to vary depending on which segment of the market they’re looking to enter.
Prices were slightly higher ($2,300) on a monthly basis – in April. But they remain much lower than the same time last year, even if the average price of a detached home (just over $1.37 million, according to the Toronto Regional Real Estate Board) is still out of reach for the majority of newer buyers.
In the condo sector, though, average prices have dipped as low as $635,653 across the GTA, a far cry from the days of the COVID-19 pandemic when they soared as buyers rushed to take advantage of rock-bottom interest rates and plunging borrowing costs.
Ominously for first-time buyers, there are some signs that Ratehub’s report might mark one of the first hints of a gradual tightening of market conditions once again.
That’s been driven in part by a runup in mortgage rates, with bond yields climbing in recent weeks and pushing fixed rates higher.
Plenty of buyers are still sitting on the sidelines – “waiting for the right time to jump in and waiting for signals from rates, signals from housing prices, that they’re not making a move at the wrong time,” Tully said.
But others are “starting to get comfortable” with the idea that it’s a good time to make a move – and if the market begins to slowly heat up again, what that will mean for home prices in Toronto down the line remains to be seen.
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