Here are five predictions for the Canadian mortgage market in 2025:
Prediction 1: Loan-to-Income Ratios Will Tighten
- The government’s efforts to curb speculation and foreign buying will lead to a decrease in demand for mortgages, causing lenders to tighten their loan-to-income (LTI) ratios.
- This means that borrowers with higher debt-to-income ratios may struggle to qualify for mortgages or may need to seek alternative options.
Prediction 2: Switch Volumes Will Surge
- As interest rates rise, many homeowners will face significant payment shocks when they renew their mortgages. To avoid these increases, some borrowers will choose to switch lenders in search of lower rates.
- This trend is expected to continue throughout 2025, with millions of mortgages up for renewal.
Prediction 3: Cross-Selling Will Drive Rate Competition
- As deposit-taking lenders seek to cross-sell other financial products, they will offer more competitive mortgage rates in an effort to attract customers.
- This increased competition will benefit consumers, who can take advantage of lower interest rates and bundled pricing options.
Prediction 4: Debt-Laden Consumers Will Seek Cheaper Digs
- Rising debt-service ratios and non-mortgage debt loads will force many Canadians to seek cheaper housing options. As a result, there may be an increase in the demand for homes in smaller cities or rural areas.
Prediction 5: Rate Competition Will Intensify
- As lenders compete for market share, interest rates are expected to remain low throughout 2025. This will make it more expensive for non-monoline lenders to offer mortgage products without cross-selling other financial services.
Additional Insights:
- The Canadian government’s policies aimed at curbing speculation and foreign buying may have unintended consequences on the housing market.
- With millions of mortgages up for renewal, borrowers should be prepared for potential payment shocks when they renew their loans.
- As lenders compete for customers, consumers can expect more competitive mortgage rates and bundled pricing options.
Author:
Robert McLister is a mortgage strategist, interest rate analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
This article provides five predictions for the Canadian mortgage market in 2025 based on current trends and government policies. The author highlights the potential consequences of loan-to-income ratios tightening, switch volumes surging, cross-selling driving rate competition, debt-laden consumers seeking cheaper digs, and rate competition intensifying.