Challenges and opportunities for mortgage brokers in the current rate cycle + MORE Sep 13th

Greater Toronto Area-real estate watchers say the combination of high interest rates and an uptick in new condo units coming online has led to an oversupply that will take time to balance out.

A report by TD economist Rishi Sondhi said sales activity hasn’t been absorbing supply fast enough, with July condo resales in the GTA down 25% from pre-pandemic levels.

Sondhi said the trend is tied to factors such as a wave of newly built condos hitting the market, elevated borrowing rates that have made it difficult for some buyers to close on their mortgages, and investors looking to sell properties as declining rents and negative cash flow make them unprofitable.

“The relatively elevated interest rate backdrop means that the gap between the rate of return from a condo in the GTA … and from a risk-free’ government bond has narrowed,” he said in the Sept. 5 report.

“This may have reduced the incentive to hold a condo as an investment, although the recent drop in yields could be helping to re-widen this spread…

Ontario regulator urges better oversight to protect borrowers and investors

Before the Bank of Canada (BoC) began lowering its benchmark interest rate earlier this year, some analysts predicted that falling rates would spark a significant turnaround in the real estate market. But even after three consecutive rate cuts, that scenario hasn’t played out. 

“Markets’ reaction [to the rate cuts] so far has been largely muted,” wrote RBC assistant chief economist Robert Hogue, in the bank’s latest economics report on housing. “It will clearly take deeper rate cuts to stimulate demand in a material way, as buyers continue to contend with high ownership costs and poor affordability.” 

With more rate cuts anticipated before the end of the year, MoneySense asked four experts to share their perspectives on whether it’s a good time to buy a home in Canada. Will improvements in mortgage affordability drive demand and lead to higher home prices? What other economic issues are at play? And how are high housing costs affecting different groups of Canadians, from first-time home buyers to retirees looking to downsize? Let’s see what the experts have to say, and what Canadians can expect…

The current rate environment presents new hurdles for mortgage brokers while also opening up potential growth opportunities for those able to adapt.