The news just keeps getting worse for the Young & Houseless.
The CB has paused rate declines for months and months now, even as inflation fades. In a world of tariffs, uncertainty and rogue politicians the bankers are taking no chances of being caught with their pants around their ankles. Drop rates too much, then Trump ruins the economy? That would be a Bank of Canada disaster.
So, sorry kids. Mortgages stay stuck. There could be a snippet of relief at the end of this month, but don’t bank on it.
Then there’s the condo misery.
Sales are down 75% in Toronto and close to 40% in Vancouver over the past couple of years. Inventory has been stacking up. Rents are falling. Amateur landlords are freaking as negative cash flow grows and equity falls. Prices have declined by double-digits in the past two years. There are estimates of another 10% to peel off within the next six months. The number of new, unsold condos is record-setting at over 2,000 in YVR and 16,000 in the GTA.
So your poor daughter who climbed on the ‘property ladder’ with her 500-foot dog crate one-bedder is now underwater. She can’t sell without a loss. She can’t live there for long, either. Nobody can. Woof.
And now, this. No cliff.
A lot of kiddos were counting on wholesale slaughter of greedy, leveraged homeowners who bought with cheapo mortgages in the pandemic and now face a reckoning. After all, more than a million borrowers come to the end of their five-year terms this year and early into 2026. Covid home loans as low as 1.3% have blossomed into 4.5% ones, meaning a massive jump in monthly payments – leading (the Y&H hope) to misery, anguish, forced sales, ruined lives, trashed marriages and cheaper real estate.
Alas, says a new report from TD Economics, it ain’t happening. “Media headlines are raising alarm bells that the ongoing wave of mortgage renewals is a looming “shock”. So, it may come as a surprise to learn that aggregate mortgage payments in Canada are actually declining,” says the bank. Interest payments have actually declined in recent months, pushing overall mortgage costs into contraction. Yes, kiddos, real estate values may be softer but owners are better off.
How could this be?
Well, the cheapest pandemic rates were for variable-rate mortgages, and a lot of those have ticked lower over the past two years as the CB dropped its policy rate and inflation moderated. Says the bank: “We estimate that more than one-third of mortgages renewing between now and 2026 fall into this “early relief” group – characterized as those with variable-rates or short-term fixed mortgages that will be either renewing at lower rates or are benefitting from interest rate cuts. These borrowers tend to carry above-average balances, which magnifies their effect on the aggregate figures.”
So only about four in ten borrowers will face a higher cost for their mortgage upon renewal – folks who borrowed to buy during Peak House in late 2020 and early 2021. Those renewals will take place in the last quarter of this year and the first of 2026. By then, economists surmise, Canada will likely be in a mild recession and the Bank of Canada will have chopped rates at least a few times.
Finally, economists say there are three factors coddling those who were gripped with FOMO and won a bidding war back when we were all masked-up. First, houses are worth more now than in 2020, so they have equity growth that can be tapped into, if necessary. Second, household net worth has grown. “Assets are up 45%, including a 42% increase in more liquid deposits.” And, third, cash flows are higher. The bank says personal disposable income is higher by 27%.
This is not the media spin. It doesn’t hunt with the crew of doomers and nihilists who populate this pathetic site. And it does not foretell an inevitable real estate cratering. In fact, many econs believe today’s tumble in resale levels and a virtual halt to new construction in major markets is setting us up for a rebound in buyer desire, competition and prices once the economy settles (and a certain orange person departs).
Conclusion: “Provided rates continue to decline, especially at the long end, national mortgage payments should remain manageable. Our forecast for the mortgage service ratio – a measure of how much income goes toward payments – maintains improvement through year-end, before hitting a plateau that will remain higher than before the pandemic,” says the bank, adding this renewal thing will be “a strain, but not an acute one.”
Do you believe it?
These days we have a buyer’s market. It will likely intensify as listings swell, prices melt and then a weaker economy takes rates south. That would put a floor into early 2026. Write it down.
About the picture: “Delylah is our pandemic foster fail, aged somewhere north of eleven,” writes Tim. “She is 100% not a pit bull; her adoption papers say “boxer mix” and that is my story and I am sticking to it.”
To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.