Refinances reached a new two-year high this month, online mortgage platform says
The Bank of Canada’s rate hikes have led to a 10% decrease in new home purchases and a rise in early mortgage renewals, according to digital mortgage platform nesto.
“For the first time in two years, refinances hit an all-time high in Q1 2022, and reports found a peak in the number of consumers leaving big bank lenders in search for lower rates,” the company said in its May 2022 report.
However, the lack of new buyers attests to the negative impact of the rate hikes on consumer morale.
“As it stands today, just over 55% of our overall demand [comes] from users interested in purchasing a new home, in comparison to 65% four months prior,” nesto said. “Compare this with the current increase in renewals, which is up just above 30%, the highest it’s been in two years.”
Read more: How heavily are rate hikes weighing on home-buying activity?
nesto said that on average, the pace of rate changes has nearly tripled since the BoC began its sizeable hikes earlier this year.
“While current homeowners are racing to lock in the low interest rates as they stand before another rise, hesitancy stalls new home buyers from securing new mortgages,” nesto said.
Data from the Canadian Real Estate Association showed that in April, home sales activity plummeted by 12.6% on a monthly basis, accompanying a 0.6% drop in the home price index to reach $866,700. The actual national average home price stood at around $746,000 in April, representing the second straight month of declines despite remaining 7% higher annually.
