A little bit of a “contrarian”, but perhaps a helpful take on the housing market in Canada. We have been doing a lot of re-financings, clients selling or contemplating selling recreational properties, as well as “income properties”.

 

Of course, each person’s situation is unique: depending on income needs, leverage, time horizon, etc. I do get a lot of people concluding that mortgage rate resets will bring the housing market down. There might be some data that suggests this view is exaggerated.

 

The sum total hit to mortgage payments as fixed-rate mortgages are reset higher over 2024–26 amounts to about 1% of total household income between now and then (see chart). That is a calculation that took mortgage rates at their recent peak and allowed for no income growth over this period. In reality, the shock effect is likely to be lower as incomes rise and fixed mortgage rate relief may emerge by then. For what it's worth, my best guidance is that interest rates are likely to remain elevated for the foreseeable future, but likely a little lower than where we are right now.

 

It is interesting in the chart, that 35% of the homes occupied in Canada have mortgages, while two-thirds of hose occupiers either rent or don’t have a mortgage. So, while on an individual basis, there might be pain for some families, on the whole, it isn’t enough to create a massive shift in the dynamics of home values.

 

 

I won’t post a photo of my NY Marathon (but happy to send it to anyone who asks). I predict though I will be running another one (only one more!).

 

This Monday is a bank holiday (but we will be working, markets open, banks closed). In the current environment, this remembrance for the men and women who have served, and continue to serve our country during times of war, conflict, and peace is perhaps as important as ever.

 

Have a great weekend.