Broker on shifting trends at play in the 2023 market
Canada’s mortgage market continued to shift in 2023 – and while few of those changes came as a surprise to agents and brokers, they still required an adjustment in approach and advice to clients.
Things played out in the mortgage space “mostly as expected” this year, according to Dartmouth, Nova Scotia-based broker John Vo (pictured) of Spicer Vo Mortgage, who told Canadian Mortgage Professional that a continued cooldown from the heights of the COVID-19 pandemic was always in the cards.
“We expected it to slow down. It couldn’t last forever,” he said. “With the busyness of COVID, of multiple offers, it wasn’t uncommon to have a property that had 30 to 40 offers on it, and for it to go to $100,000 to $200,000 over asking.
“I think most of us in real estate just knew that that would come to an end. We’re still seeing multiple offers and bids over asking, but just not as aggressive. Maybe we’re seeing five to 10 offers and $25,000 over asking – and it really depends on the property, the area and the price.”
While in Halifax, homes on the higher end of the price spectrum tended to see less popularity in 2023 with interest rates on the rise and borrowing costs elevated, there was still robust activity in and around the $400,000-$600,000 price range, Vo said, with the pandemic market boom having highlighted the need for buyers to strike while the iron is hot.
With the ongoing high-rate and subdued market scenario expected into early 2024, Elan Weintraub of The Mortgage Outlet, highlights the need for careful planning among mortgage agents and brokers.https://t.co/ZfYcd4pxVG#mortgageindustry #mortgagebroker #economicoutlook
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 30, 2023
What’s changed for brokers and borrowers in the 2023 market?
On the whole, higher rates throughout the year saw borrowers gravitate towards shorter-term fixed-rate mortgages as an alternative to surging variable rates, with those options allowing them to take advantage if the market shifts again and rates fall in the coming years.
However, Canada Mortgage and Housing Corporation (CMHC) indicated in its latest residential mortgage industry report that many Canadians appeared to be losing faith in an imminent rate drop, with the length of preferred fixed-rate mortgage stretching (but generally remaining below five years).
“Sometimes people, just because of the volatility, really wanted that five-year fixed – and sometimes people had to take it because it was the lowest, in order to qualify, if they were at their max for whatever reason,” Vo said.
“But generally speaking, the mortgage conversation was a longer one. Before, when rates were 1.89%, it was pretty much a no-brainer: you take that for five years. And then as rates start to go up, we’re starting to have bigger conversations: What’s your risk tolerance? What does your budget look like? And what’s your forecast for the rates? And then we’ll tailor it for variable, three-year, four-year, five-year, et cetera.”
Those deeper conversations, Vo said, have further shifted the focus of the broker role away from that which prevailed during the pandemic – based on helping clients secure a purchase in a frenzied market – and towards a more consultative, advisory role about the best borrowing option in a difficult climate.
Atlantic market: How did out-of-province migration fare in 2023?
A prominent trend at play in Atlantic Canada at the height of the COVID-19 pandemic was the migration of homebuyers from other provinces to the region thanks to its high affordability and often higher standard of living at lower costs.
The easing of public health restrictions and remote-working arrangements across Canada spurred speculation that the post-pandemic years could see something of a reversal of that trend – but while some buyers may have decided to return to their own provinces, it hasn’t been a prominent factor in the 2023 market, according to Vo said.
“One of the [questions] was about the migration of people through Canada to the Atlantic, and whether we would see an exodus or reversal,” he said. “Thought I think we see a bit of that – you can’t expect it not to happen – we're not seeing a lot of it, in my opinion.
“It’s really a hard thing to gauge, but my thought is that we’re seeing more [out-of-province] people. I think people have adapted to a slower pace of life, adapted to working from home.”
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