Mortgage costs could rise faster than incomes
October 18, 2017
The average Canadian homeowner should see their household income rise by 2.5 per cent next year, but Scotiabank says average mortgage costs could increase by 8 per cent.
Federal mortgage rule changes, including more stringent stress tests for uninsured mortgages, are expected to be unveiled this November and will result in increased costs for homebuyers, the bank said in a recent report.
“We anticipate some moderation in home sales over the forecast horizon, as rising borrowing costs and tougher mortgage-qualification criteria lead to some further erosion in affordability.”
RBC provided a similarly cautious view, stating that housing affordability is currently at its lowest since 1990, having worsened over the last two years.
RBC is expecting four more rate hikes by the end of 2018, placing Canada’s central bank rate at 2 per cent—a level it last reached before the 2008 financial crises.
All markets would be affected, but the effect would be most substantial in high-priced markets like Toronto and Vancouver, RBC cautioned. “The days of ultra low interest rates in Canada are over... These increases are just the beginning of a hiking campaign,” the bank stated.