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Ontario Housing Market Spotlight: Mortgages Owed on the Rise

The Ontario housing market appears to be cooling and homeowners are owing more than ever on their mortgages. With interest rates higher and banks being more restricted with respect to CMHC-insured mortgages, some homeowners are scrambling now to refinance their homes to consolidate debt, lock in mortgage rates and even put their homes on the market. If Ontario housing market trends continue the way they’re going, homeowners could face their mortgage renewals with more debt, higher rates, and less borrowing power.

The September 2017 Teranet Market Insights report: http://www.teranet.ca/wp-content/uploads/2017/10/Teranet-Market-Insight-Report_Sept20179.pdf revealed an increase in the total value of Ontario mortgages owed over the past three years.

Total mortgage value went from $154.8 billion in 2014 to $219.9 billion in 2016. 2017 is also on track to have another strong growth year with total mortgage value already exceeding $183.9 billion at the end of September — practically the equivalent of the total number of mortgage transactions in 2015.

One factor that could come as a surprise is that the number of mortgage transactions over the time period remained fairly consistent.

The average amount of each mortgage transaction has been rapidly increasing over the past three years, too. At the start of 2014, mortgages valued between $500,000 and $1 million represented 11.7% of total mortgage transactions. As of September 2017, those mortgages represented 24% of total transactions.

Mortgages valued between $1 million and $2 million nearly tripled from a 1.5% contribution in January 2014 to 4.3% contribution by mortgage transaction in September 2017. And the mortgage amount share doubled from 6.5% in January 2014 to 13.4% in September 2017.

The volume and transaction numbers of lesser-valued mortgages below $500,000 have declined, signifying a trend towards high mortgage value transactions taking place.

So, what does this mean to you? Well, it could present both opportunities and challenges.

On the opportunity side of things, since Canadians are potentially facing fluctuating interest rates and higher mortgages, this could be the time to motivate homeowners to refinance, or to convince those considering buying a home to purchase now, before the Ontario housing market potentially cools even further.

For lenders, the new challenges come in as you must now be aware that you could face a downturn in the amount of new business to put on, find the market more competitive, and, in some cases, may even see a spike in defaults when these mortgages owed come up for renewal at higher rates and security valued at less than originally thought.

How can you assess and stress test your portfolio? Purview for Lenders can help.

Call us today at 1.855.787.8439 or visit www.purviewforlenders.com.

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