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Mortgage Trends in 2025: What You Need to Know –
January 14, 2025 | Posted by: Yelena Markus
As we step into 2025, Canada’s housing market presents an exciting yet challenging landscape. Various factors, such as interest rate adjustments, shifts in demand, and government policy changes, will play pivotal roles in shaping mortgage trends and home prices. Let’s dive into what makes the mortgage outlook optimistic for buyers and investors alike.
1. Anticipated Surge in Mortgage Renewals
In 2025, a significant number of mortgages will come up for renewal, with around 100,000 renewals expected monthly. Many of these mortgages originated before mid-2022, when interest rates were much lower. As a result, lenders are likely to compete aggressively to retain existing clients, and borrowers may seek better deals from different lenders, creating a dynamic refinancing market.
2. Easing Mortgage Switching Process
For those looking to switch their mortgages, the process will be simpler in 2025, thanks to relaxed qualification rules. Borrowers will be exempt from the federal stress test, making it easier to transfer mortgages to more favorable terms or lenders, benefiting those who wish to explore new options.
3. Extended Amortization Periods for Better Affordability
In 2025, first-time homebuyers and those purchasing newly constructed homes will benefit from the ability to stretch their mortgage payments over 30 years. This extended amortization period, available on insured mortgages, will boost purchasing power and help buyers qualify for larger loans, opening up more options.
4. Wage Growth Enhances Borrowing Capacity
With wages expected to rise by more than 4% annually, many Canadians will find themselves in a better financial position to qualify for mortgages. This wage growth, outpacing inflation, will help more buyers access higher loan amounts and improve their overall ability to enter the housing market.
5. Property Values Set to Increase
Home prices in Canada are expected to rise by over 4% in 2025, leading to larger mortgages, especially for buyers with a 20% down payment. These price increases will impact both new homebuyers and investors, as larger loan amounts will be required to keep pace with rising property values.
6. Higher Limits on Insured Mortgages
In a bid to stimulate growth in the housing market, the limit on insured properties has been raised from $1 million to $1.5 million. This change expands the range of homes eligible for insured financing, potentially spurring demand in higher-priced markets.
7. Positive Buyer Sentiment Expected
Many buyers have postponed their purchases due to high interest rates and limited affordability. However, with market conditions expected to stabilize in 2025, pent-up demand could lead to an increase in homebuying activity, providing new opportunities for those ready to enter the market.
8. Economic Recovery Could Boost Demand
As the Canadian economy stabilizes, unemployment rates are expected to decline, driving job growth. This, in turn, will fuel housing demand, supporting a healthier mortgage market by the end of 2025.
9. Variable Mortgage Rates Could Provide Relief
While fixed mortgage rates might see moderate increases, variable rates are expected to drop by up to 50 basis points. This reduction in rates will lower the qualifying rate, improving affordability for borrowers with variable-rate mortgages. As a result, more people may opt for adjustable-rate mortgages (ARM), benefiting from reduced payments.
10. New Opportunities for Homeowners to Refinance
Starting in mid-January, homeowners will have the option to refinance up to 90% of their property’s value through the Canada Secondary Suite Loan Program (CSSLP). This initiative allows homeowners to access additional funds for projects like secondary suite construction, encouraging refinancing activity.
Understanding Interest Rates and Policy Shifts
In Canada, the preference for shorter mortgage terms (such as the typical five-year fixed mortgage) contrasts with longer terms available in countries like the U.S. This shorter-term model ensures rate stability but also limits lenders' ability to manage long-term risks. As such, Canadian borrowers must carefully consider their mortgage options to avoid potential financial stress.
Housing Affordability: Key Considerations for Buyers and Investors
For Homebuyers: Monitoring housing prices and interest rates is crucial for making informed decisions in 2025. With wages on the rise and interest rates trending lower, more millennials and Gen Z buyers may finally make the leap into homeownership. Timing will be essential, as fluctuations in rates and potential policy changes can impact affordability.
For Investors: The real estate market in 2025 will offer opportunities for strategic investors. Focus on diversifying investments, with a particular eye on the growing demand for purpose-built rentals. Cross-border investments, especially from the U.S., will play a key role in Canada’s rental housing market, which could boost supply in major cities.
For Mortgage Professionals: With interest rates on the rise and many homeowners renewing mortgages at higher rates, mortgage brokers and lenders must be prepared to offer advice on refinancing and other financial strategies. Staying informed about regulatory changes and market conditions will be crucial to supporting clients during this transition.
In Conclusion: Preparing for 2025
The year 2025 promises to bring both challenges and opportunities to Canada’s housing and mortgage markets. As interest rates gradually decrease and housing demand shifts, individuals and investors alike must stay adaptable to thrive in this evolving landscape. Whether you are looking to buy, renew, refinance, or invest, a strategic approach will be essential for navigating this year’s mortgage environment.
Connect with Yelena Markus – Your Expert Mortgage Broker in Montreal
If you're ready to explore your mortgage options and navigate the evolving market in 2025, reach out to Yelena Markus, one of Montreal’s top mortgage brokers. With her expertise, she’ll help you secure the best possible terms for your home financing needs. Contact Yelena today and start building a smart mortgage strategy that works for you!
