Interest Rates Come Down, and Mortgage Growth the Slowest in 2 Decades

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Jun 7

Wahi's Week in Real Estate

Every Friday, Wahi brings you the most important real estate stories from the past week.

Interest Rates are Falling

On Wednesday the Bank of Canada finally did the thing that economists, business owners and everyday borrowers have been speculating about non-stop for more than two years, and reduced its key policy interest rate. Though the overnight rate dropped by a mere quarter of a percent, it’s the first cut since 2020, and since rates started rising in May of 2022, signalling a major shift in the economy and the housing market. With borrowing costs on their way down and mortgage rates following behind, the announcement is expected to kickstart a busy summer buying season after years of slow growth.

“According to the Canada Mortgage and Housing and Housing Corporation, the first quarter of 2024 saw the slowest residential mortgage debt activity in 23 years, up just 3.4%.”

Mortgage Uptake Hits Generational Lows  

The last time housing market activity was this slow Destiny’s Child was topping the charts, Jean Chrétien was Prime Minister, and the Maple Leafs were in the conference finals. According to CMHC, the first quarter of 2024 saw the slowest residential mortgage debt activity in 23 years, up just 3.4%. The agency says few Canadians took out housing loans in the face of higher interest rates and out of hope of a rate cut on the horizon. Residential mortgage debt stood at $2.16 trillion as of February, while delinquencies hit 0.17%, up from a record low of 0.14% in Q3.

A Quiet Spring in the GTA Comes to an End  

It’s been a historically slow spring in an historically active housing market. According to the Toronto Regional Real Estate Board, home sales in the GTA declined 21.7% last month compared to the previous year, as Torontonians held out for lower borrowing rates. While buyers remained on the sidelines, sellers remained busy, adding more than 18,600 new homes to the market, 21.1% more than last May. The extra inventory and lack of transactions also sent prices back by 3.5%. Now that interest rates are on their way down, however, all those trends are expected to be reversed in relatively short order. 

Softer Sales and Higher Inventory in Vancouver  

Like Canada’s biggest city, the country’s most expensive housing market is also on a path to greater balance — one that is similarly expected to come to a swift end. According to Greater Vancouver REALTORS®, home sales dropped almost 20% last month compared to May of 2023, while inventory jumped a whopping 46.3%, as West Coast buyers held out for better borrowing terms. Despite the growth in inventory and slowdown in sales, however, prices increased 2.3% in Metro Vancouver over the last year. With interest rates on the decline, experts expect housing market activity to also pick up through the summer.

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Cancelled Projects Costing GTHA Billions  

The cost of building new homes is high, but the cost of not building them can be higher. In recent years there’s been a lot more of the latter, as 60 condo projects have been put on hold indefinitely throughout Toronto and Hamilton since 2022. According to the Canadian Home Builders Association every 1,000 condo units under construction creates 1,600 new jobs in the industry, worth about $400 million in economic activity. While interest rates are finally trending downwards, industry experts warn that it will take time for the construction to restart; meanwhile the region is losing billions in economic activity.

Jared Lindzon

Wahi Writer

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