The Fall 2023 Residential Mortgage Industry Housing Report from Canada Mortgage and Housing Corporation (CMHC) shows data that indicates an “increasing share of Canadians are struggling with their debt payments”.

But that doesn’t mean Canadians are ready to talk about it.

Negative sentiments among Canadians

“I think it’s a mixture of a feeling of disappointment, a bit of shame and overall frustration,” says Daniel Vyner, principal broker at DV Capital Corporation in Toronto. “These are hard-working people doing the best they can. I think people are frustrated and stressed at the current situation.”

In the first half of 2023, more than 290,000 mortgage borrowers had to renew their mortgages at a significantly higher interest rate, resulting in higher debt-servicing costs.

The impact of rising interest rates is also felt among those within the real estate industry. In Toronto, realtors and mortgage brokers are seeing what some might call an “extreme buyer’s market”, where properties simply aren’t selling.

A tough market to navigate

“It’s definitely a buyer’s market. Typically, you’d see a price discovery, but we’re not seeing that right now. You would expect to see prices come down in a buyer’s market, but we’re not seeing that take place the same way it did back in the first quarter of 2022,” explains Daniel Foch, host of The Canadian Real Estate Investor Podcast.

This makes for a particularly difficult market to navigate. 

“The sales volume is so low that there’s not even enough sales to substantiate new comparables, and therefore values haven’t really started falling the way that they were in Q1 of 2022”, says Foch.

Borrowers and homeowners don’t just have mortgage payments to worry about — there are other living expenses, such as auto loans and credit card payments, that Canadians are trying to juggle.

“Homeowners are doing their best to ‘keep a roof over their head’ and are beginning to default on other financial obligations”, says Vyner. “This raises the question: how much longer can struggling homeowners sustain current pressure and to what degree will higher rates and payment increases add fuel to the fire?”

“The market in contraction” — be pragmatic, be realistic

As much as many would like for there to be a crystal ball that can predict the future of Canadian real estate, professionals are urging the public to be pragmatic and realistic looking ahead into 2024, 2025 and beyond.

“The writing’s on the wall”, says Foch. “The Canadian market is in contraction. GDP is falling, we’re in a recession. The consumer will continue to suffer. The Bank of Canada has stated they don’t expect rates to come down anytime soon.”

Cameron Cassidy, broker & branch manager at Right at Home Realty in Oshawa, further elaborates: “The renewals coming into 2024 and 2025 are what we’re trying to prepare our clients for. People going from 2 per cent to 5 per cent is a big payment shock.”

However, borrowers and homeowners still have alternative options to consider.

Educate clients on their options

 “A lot of the preparation is awareness: ‘Hey, this is coming. Don’t bank on rates coming down’,” continues Cassidy. “It’s making sure they understand they have options.”

Some options to consider include selling a property to gain access to equity, electing to rent, taking time to shop around to different lenders, making pre-payments on a mortgage when possible and starting long-term financial planning for the future.

Cassidy recalls one recent incident with a realtor at his brokerage: “They had a client call them saying that the bank sent them a letter forcing the sale of their property due to non-payment from job loss. The bank was calling for the entire loan due.”

The client ended up selling their home, despite wanting to keep it. The home was purchased at about $280,000 in 2008 and sold for over $800,000 in 2023. Cassidy feels “It’s not a bad option — even if it’s not the one they wanted.”

Industry lacks sensitivity training

It can also sometimes be easy for real estate professionals to overlook that behind all the data are real people’s lives being affected. Selling a home to access equity may sound practical to a licensee, but to homeowners who have lived in one place for most of their lives, it may feel like an impossible decision.

“Real estate education, such as my work with Humber College, in general, is a compliance course focused on RECO standards. It’s focused on the technical steps, understanding the laws and limitations required for realtors to promote their clients’ best interests. There’s no sensitivity training in that”, says Cassidy.

“It’s the brokerage’s job to focus on the training for their realtors, whether that be sales training or sensitivity training, to help them try to solve these complex problems.”