January 4, 2020
2020 Predictions for Canada’s Mortgage Market and Housing Market
Written by Steven Tulman
The last few years of the previous decade brought several ups and downs in the housing and mortgage markets in Canada. Here are the 5 predictions that economists and housing market specialists are predicting for Canadian homeowners, homebuyers, and home sellers in 2020 and as we enter this new decade.
Conventional Mortgage Rates Are Expected to Remain Low
The Bank of Canada is the official central bank of Canada that is mandated with the task of setting and determining what the cost of borrowing is for lenders who lend directly to consumers, such as banks like TD Bank and Scotia Bank, who are two of the banks that offer great low mortgage rates through Canadian mortgage brokers such as Clover Mortgage.
Throughout 2019, the Bank of Canada has maintained mortgage interest rates consistently low at 1.75% as the overnight lending rate. This is the interest rate that banks pay to borrow money from the BoC (Bank of Canada) and other banks. Because the overnight rate has been kept this low, banks and credit unions have been able to offer borrowers low interest rates on mortgage products, line of credit products, and other credit products.
Based on the Bank of Canada’s year-end speech, since many economic factors in Canada and around the world are not at their strongest, and national bond yields are still sitting at historic lows, mortgage interest rates are expected to stay low in 2020.
Qualifying for a Mortgage Might Become Easier to Do
Canadian Prime Minister, Justin Trudeau, stated that the Canadian government will re-examine the criteria currently in place to administer the mortgage stress test that has definitely made getting a mortgage a more “stressful” experience for many Canadian homebuyers and homeowners who might be looking to refinance their homes. Pun intended. With a few small changes to the qualification requirements, the government can simultaneously make it easier for Canadians to buy and refinance properties while still ensuring that the Canadians are still able to afford their mortgage payments in the event that interest rates rise again.
One of these changes would be lowering the current mortgage stress test rate from 5.19%, or by allowing for the qualifying rate to fluctuate depending on each borrower’s individual income, credit, and overall financial situation.
Home Sales and Prices Will Continue to Grow
The housing marketing in Toronto, other parts of Ontario, and Canada as a whole has seen growth and improvement in 2020 after the real estate fall that occurred over the course of 2017 and 2018. Economists expect this growth and recovery to continue through 2020.
As a result of lower interest rates along with other factors saw a major increase in the demand for houses across major and secondary Canadian cities such as the Greater Toronto Area, Ottawa and the surrounding area, and the Greater Vancouver Area.
Based on a recent forecast by the Canadian Real Estate Association (CREA), home sales are expected to rise to 530,000 sales in 2020, which is an 8.9% increase over 2019 and a 13.5% increase over 2018 home sales figures. While the number of homes is expected to grow, the average price for a home in Canada is also expected to increase by 6.2% over 2019 to $531,000 in 2020. These home prices are significantly higher for cities like Toronto and Vancouver.
Ontario Will Fuel the Continued Housing Market Rebound
Ontario has been, and will likely continue to lead the continued growth in the Canadian real estate market, with an estimated 210,000 properties that are expected to be sold in 2020. That would account for approximately a 3.2% increase in Ontario alone. The estimated average sale price for homes in Ontario is approximately $623,000, a 6% increase.
Toronto Expected to be a Sellers’ Market
There is no guarantee, but due to a variety of factors, such as foreign buyers, continued commercial and industrial growth, increased employment opportunities, and the overall desirability of the “big city”, home sales in the GTA are expected to thrive as a seller’s market throughout 2020 and beyond. The lack of supply in Toronto continues to be an issue and therefore buyers have more limited inventory to choose from, hence the prediction of another seller’s market.
If you are interested in purchasing a property in 2020, getting pre-approved for a mortgage is an essential start to the process. By getting pre-approved, you can feel confident about the budget that you are shopping around in. Did you know that even if you have a low credit score, you might still be able to get approved for a mortgage.
Call Clover Mortgage today to speak with an experienced mortgage broker who can help you with your pre-approval or approval if you already purchased your property.