Mortgage Market Predictions for 2025
The Canadian mortgage market is poised for significant changes in 2025, driven by shifting interest rates, increasing debt levels, and evolving lender strategies. Here are five key predictions that will shape the mortgage landscape:
- Loan-to-Income Ratios to Remain a Focus
As incomes rise more than four percent annually and governments dissuade foreign and speculative buying, mortgage affordability should stabilize. However, lenders will continue to scrutinize loan-to-income ratios to mitigate risk.
Key Statistic: Most incomes are rising at an annual rate of 4% or higher
- Debt-Service Ratios to Increase Pressure on Homeowners
Although debt-service ratios have declined slightly, they remain near record levels. With non-mortgage debt loads soaring (+9.4% for credit cards and +13.6% for auto loans) and prices for services, food, property taxes, insurance, and other expenses rising, many debt-laden consumers will seek cheaper housing options.
Key Statistic: Non-mortgage debt loads have increased by 9.4% (credit cards) and 13.6% (auto loans)
- Switch Volumes to Surge as Canadians Seek Better Rates
Payment shock awaits countless Canadian mortgagors when they renew this year, with most facing rates 200+ basis points above their previous deals. In an attempt to lower monthly payments, Canadians will comparison shop mortgage rates more aggressively. Many with higher debt ratios will exploit new rules permitting borrowers to switch lenders without having to pass the federal mortgage stress test.
Key Statistic: 1.2 million mortgages are up for renewal in 2025
- Cross-Sale to Drive Rate Competition
Deposit-taking lenders have increasingly been willing to sacrifice upfront interest revenue (i.e., offer fatter mortgage discounts) in hopes of cross-selling other financial products. I’m talking about products like savings accounts, credit cards, credit lines, creditor life insurance, GICs, and other investments.
Key Statistic: Cross-sale agreements are becoming more common as lenders seek to diversify their revenue streams
- Rate Competition to Increase as Lenders Compete for Market Share
The trend of bundled pricing (whereby lenders offer a lower rate if you agree to other products) will put a competitive squeeze on lenders that don’t have other financial services to sell (‘monoline’ lenders). This competition will lead to more aggressive rate discounts and better deals for consumers.
Key Statistic: Lenders are increasingly willing to sacrifice upfront interest revenue in hopes of cross-selling other financial products
In conclusion, while these predictions don’t go too far out on a limb, one thing is certain: 2025 will bring plenty of surprises. As the mortgage market continues to evolve, lenders and borrowers alike must stay informed and adapt to changing circumstances.
About Robert McLister
Robert McLister is a mortgage strategist, interest rate analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Sources:
- Canadian Mortgage Rate Survey produced by MortgageLogic.news
- Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts
Note: This article is for general information purposes only and should not be considered as investment advice or a recommendation to buy or sell any financial product.
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This article is based on the original piece "Why loan-to-income ratios and switching will be the talk of mortgage markets in 2025" by Robert McLister, published on [insert date].
