2024 Mortgage Recap

The year 2024 will likely go down in Canadian financial history as one where the mortgage market underwent one of its fastest directional shifts on record. After a prolonged period of rate hikes throughout 2022 and 2023, the Bank of Canada (BoC) started an easing cycle. This meant a significant reduction in borrowing costs, following a period when many Canadians faced higher monthly mortgage payments than they had in decades.

By year-end, the federal government and the financial regulatory bodies introduced or expanded several housing programs designed to improve housing affordability and ease supply constraints. At the same time, many first-time buyers continued to grapple with high purchase prices, and existing homeowners navigated mortgage renewals often at higher rates than their initial terms.

This article will delve into every corner of the 2024 Canadian mortgage market, evaluating how rate cuts, policy changes, housing market shifts, and major lender acquisitions shaped the borrowing landscape. We’ll also take a look at what’s on the horizon for 2025, assessing both potential opportunities and ongoing risks.

2. Economic Context and Overview

Macroeconomic Environment

Canada’s economic trajectory throughout 2024 demonstrated moderate growth, with Gross Domestic Product (GDP) expanding in the range of 1.3% to 1.7%, according to several private sector forecasts. This subdued growth came on the heels of a global economic slowdown, exacerbated by previous interest rate tightening in many advanced economies.

Key drivers of growth this year included the robust performance of the service sector, increased government spending in infrastructure projects, and a rebound in exports—particularly in energy and commodities—once global inflation pressures began to subside.

Labor Market Dynamics

The unemployment rate hovered between 5.5% and 6.0%, a slight increase from the historical lows witnessed in 2022 and early 2023. Employers continued to report difficulties in finding skilled labor, although these pressures eased compared to previous years. Wage growth maintained an annual pace of around 3%, which helped partially offset rising living costs for many households.

Inflation Evolution

One of the most talked-about metrics this year was the Consumer Price Index (CPI). Having peaked at over 8% in mid-2022, inflation stabilized to around 2.0% by the close of 2024. Several factors contributed to this deceleration:

1. Falling energy prices globally
2. Improved supply chain stability
3. Tighter monetary policies in prior years, which took time to filter through the economy

The Bank of Canada’s decision to cut rates in a series of five consecutive moves was heavily influenced by this inflation stabilization, as policymakers concluded that the economy could handle lower borrowing costs without reigniting runaway price growth.

3. Interest Rate Movements in 2024

3.1 From Rate Hikes to Rate Cuts

Arguably the most significant development of the year was the Bank of Canada’s pivot from hiking interest rates to bringing them down:

• January to April 2024: Overnight rate remained at 5.00%
• May to December 2024: Five consecutive cuts totaling -175 basis points

By the end of December, the BoC overnight rate settled at 3.25%.

Below is a table illustrating the Bank of Canada’s rate changes over the year:

Prime rates at major banks followed suit. After peaking at 7.20% at the end of 2023, the prime lending rate was down to about 5.45% by year-end 2024.

3.2 Inflation Trends and Consumer Relief

As inflation cooled to the 2% mark by November, this provided additional reassurance that the BoC’s pivot would not re-accelerate price pressures. For many Canadians, these rate cuts translated into slightly lower monthly payments on variable-rate mortgages and improved qualification prospects for new mortgage applicants.

4. Housing Market Developments

4.1 Home Sales and Prices

Between January and November 2024, home sales climbed progressively, fueled by renewed buyer confidence and falling mortgage rates. The average home price reached around $694,000 nationwide—a 7.4% annual increase from November 2023.

Key observations:

• Markets in Ontario and British Columbia experienced quicker rebounds, with double-digit percentage increases in average home values in some metropolitan areas.
• Prairie provinces showed moderate but stable price growth.
• Atlantic Canada retained its relative affordability compared to the rest of the country, although price gains were notable in urban centers like Halifax.

4.2 Regional Variations in Market Activity

Not all regions followed the same trajectory in 2024. While certain urban areas saw prices rebound briskly, smaller markets with overextended valuations in 2022–2023 experienced a more tempered recovery.

Below is a simplified chart illustrating the approximate average year-over-year home price changes in major regions:

         +----------+-------------+
         | Province | YoY Change  |
         +----------+-------------+
         | Ontario  | + 9%        |
         | BC       | + 10%       |
         | Quebec   | + 6%        |
         | Alberta  | + 4%        |
         | Atlantic | + 8%        |
         +----------+-------------+

Note: The numbers above are broad estimates and do not account for city-level variations.

4.3 Rental Market Adjustments

Falling mortgage rates, combined with ongoing housing supply shortages, put upward pressure on rents. Some tenants, disillusioned by the intense market competition, saw ownership opportunities as rates dropped, transitioning from renting to buying. This movement slightly eased rental vacancy rates in certain city cores but tightened supply in others where first-time buyer demand surged.

5. Mortgage Policy and Regulation

5.1 Government Programs

Government authorities introduced multiple housing-focused initiatives to tackle affordability:

1. Secondary Suites Initiatives: Federal programs offered low-interest loans and grants for homeowners who add basement apartments or garden suites. The goal was to boost rental supply without putting upward pressure on single-family home prices.
2. Insured Mortgage Purchase Cap: The purchase price cap for insured mortgages was raised to $1.5 million, extending coverage to a broader range of properties—especially in high-cost markets like Toronto or Vancouver.
3. Incentives for First-Time Buyers: The government allowed certain first-time buyers to access 30-year amortizations, reducing monthly payments at the expense of longer debt timelines.

5.2 Stress Test Changes

OSFI (Office of the Superintendent of Financial Institutions) made a landmark decision to remove the stress test on uninsured mortgage switches, allowing borrowers to switch lenders at renewal without facing the same stringent qualification rate. However, this measure prompted industry confusion, with some lenders like BMO reinstating a variant of their own internal stress test, citing risk management concerns.

Meanwhile, the Fall Economic Statement confirmed that insurable mortgage switches (those with mortgage default insurance or meeting insurance criteria) would also be exempt from the stress test at renewal. This alignment aimed to create consistency for consumers regardless of their mortgage’s insurance status.

5.3 First-Time Buyer Incentives

The highlight for first-time buyers was undoubtedly the combination of lower rates and more accommodating regulations. Beyond the 30-year amortizations, buyers benefited from:

• Reduced Premiums: Certain insurers offered promotional rates or reduced mortgage insurance premiums to encourage new market entrants.
• Tax Incentives: Provincial-level tax breaks (such as land transfer tax rebates) were enhanced in some provinces, further easing the entry burden.

6. Mortgage Product Trends

6.1 Variable-Rate vs. Fixed-Rate Mortgages

With the BoC pivoting to an easing cycle, variable-rate mortgages regained popularity among rate-savvy borrowers. However, they remained more expensive relative to historical norms because the prime rate, even at 5.45%, was higher than it was pre-pandemic.

Fixed mortgage rates also declined, albeit at a slightly slower pace than variable rates initially. By October 2024, the average 5-year fixed rate for insured mortgages stood at around 4.39%, roughly 88 basis points below the level at the start of the year.

6.2 30-Year Amortizations and High-Ratio Mortgages

The reintroduction of 30-year amortizations for first-time insured borrowers was a game-changer. While critics argued that extended amortizations can keep buyers in debt longer, supporters pointed out that it reduces monthly payments—a crucial consideration in high-priced markets.

Additionally, with the insured mortgage purchase cap raised to $1.5 million, borrowers with high-ratio mortgages had more breathing room, especially in overheated regions like Toronto and Vancouver.

6.3 Insured vs. Uninsured Mortgage Dynamics

By the close of 2024, uninsured mortgages (those above 80% loan-to-value) still dominated a significant portion of the market. However, the line between these categories blurred somewhat, thanks to new regulatory changes allowing switchers to bypass the stress test. Lenders responded by competing on rate discounts and product flexibility, further driving mortgage innovation in both segments.

7. Major Lender and Broker Moves

7.1 Bank Acquisitions and Mergers

Corporate consolidation continued to reshape the Canadian financial landscape:

1. National Bank finalized a $5-billion acquisition of Canadian Western Bank (CWB), strengthening its presence in Western Canada.
2. RBC completed its purchase of HSBC Canada early in the year, in one of the country’s largest banking deals to date.
3. Home Trust merged with Fairstone Bank, promising expanded product ranges and more competitive rates for mortgage brokers and borrowers alike.

7.2 Technological Innovations and Online Lenders

Online mortgage platforms intensified their push into the market. Notably:

• Nesto acquired CMLS Group, broadening its coverage of mortgage finance solutions.
• Major banks upgraded their digital portals, offering quicker pre-approvals and instant rate comparisons.

This digital transformation reflects ongoing consumer demand for speed, convenience, and transparency in the mortgage approval process.

7.3 Broker Channels and Competitive Shifts

The broker channel remained a critical outlet for lenders seeking to expand market share. 2024 saw BMO re-enter the broker space, capturing headlines and signaling the major banks’ interest in leveraging third-party mortgage experts to reach more consumers.

At the same time, DLC Group secured shareholder approval for acquiring its preferred shares, fortifying its capital position. Mortgage brokers overall reported robust activity levels, capitalizing on rate cuts and a spike in renewal volumes.

8. Mortgage Renewals and Amortization Challenges

8.1 2024 Renewal Wave

A notable $251 billion in mortgages came up for renewal in 2024, a significant portion of the market. Many borrowers who initially locked in during 2019–2020 faced higher rates than their original terms. Although rates started to come down mid-year, they remained well above the historical lows of 2020–2021.

8.2 Ultra-Long Amortizations

Throughout 2023, some major banks had allowed fixed-payment variable-rate borrowers to extend amortizations beyond 30 or 35 years if they faced payment difficulties. With the BoC’s pivot, many of these ultra-long amortizations began to wind down as payments re-adjusted. TD, RBC, and BMO reported a drop in these stretched-out terms by Q4 of 2024.

Below is a simplified chart showing the approximate decline in ultra-long amortizations from Q1 to Q4 among select banks:

             Ultra-long Amortizations as % of Variable Mortgages
 Bank         Q1 2024         Q4 2024
 ------------------------------------
 TD           15%             6%
 RBC          12%             5%
 BMO          14%             7%

Note: These figures are illustrative and are used here to demonstrate the overall trend.

8.3 Delinquency Rates

Despite easing rates, delinquency rates edged up from their rock-bottom lows:

• Early-stage delinquencies (30-60 days late) moved closer to 0.25%, up from historical lows of 0.15%.
• Analysts projected further increases into 2025 as some households continue grappling with debt loads accrued during previous rate hike cycles.

9. Impact on Borrowers and Households

9.1 Affordability Concerns

Although mortgage rates trended downward, housing affordability remained a national concern. The dual realities of high property prices and rising costs in other areas (like groceries and utilities) still stretched household budgets. First-time buyers with modest incomes in urban centers found it challenging to qualify for suitable loans, even with the new 30-year amortization rules.

9.2 Strategies for Cost Management

Faced with these challenges, borrowers employed various tactics:

1. Refinances and Debt Consolidation: Homeowners tapped into their home equity to consolidate higher-interest debts.
2. Co-ownership Arrangements: Some buyers teamed up with relatives or close friends to pool resources and qualify for a larger mortgage.
3. Extended Amortizations: This option lowered monthly payments, albeit with a longer repayment horizon.

9.3 Personal Finance Implications

Canadians also reconsidered their personal finance strategies, placing greater emphasis on:

• Emergency Funds: Families and individuals sought to build liquidity buffers to safeguard against potential layoffs or renewed rate volatility.
• Budget Reallocations: Non-essential spending (such as travel or luxury goods) was often scaled back to accommodate higher mortgage payments.
• Retirement Planning Adjustments: Some shifted more funds into registered retirement savings plans (RRSPs) or tax-free savings accounts (TFSAs), anticipating future rate fluctuations.

10. Stock Market Moves for Mortgage-Focused Companies

10.1 Big Six Banks

The Big Six—RBC, TD, Scotiabank, BMO, CIBC, and National Bank—experienced mixed fortunes on the stock market. Below is a table summarizing their performance in 2024:

Noteworthy Observations:

• CIBC posted a significant jump of +43%, thanks in part to strong mortgage portfolio performance and effective cost management.
• TD Bank saw a -9% dip, attributed to higher provisioning and a conservative outlook on consumer debt risk.

10.2 Non-Bank Mortgage Lenders

In parallel, publicly traded mortgage companies also saw modest gains:

The relatively high dividend yields for several of these Mortgage Investment Corporations (MICs) reflect the inherent risk premium investors demand in the face of potential mortgage defaults. Nonetheless, the performance of these shares suggests market confidence in a gradual recovery of Canada’s mortgage sector.

11. Looking Ahead to 2025

11.1 Economic Outlook

Analysts anticipate that 2025 will bring modest but steady growth for Canada:

• GDP projections hover around 2% as global conditions improve.
• The unemployment rate is expected to remain relatively stable, though wage growth may slow if businesses remain cautious.
• The energy sector and tech-related services could be crucial contributors to economic momentum.

11.2 Interest Rate and Housing Market Predictions

While many economists anticipate the Bank of Canada will pause at 3.25% for a while, a few suggest there could be additional 25 or 50 basis points of cuts if economic conditions soften further. For the housing market, continuing low rates may bolster sales volume, potentially sustaining the upward pressure on home prices—unless new housing supply can keep pace.

Potential scenarios for 2025:

1. Baseline: Rates remain near 3.25% throughout 2025, housing prices rise moderately.
2. Bullish: Rates dip further if a recession threat emerges, spurring a faster housing market rebound.
3. Bearish: External shocks (e.g., a global financial crisis) force a sudden rate hike or credit tightening, dampening market activity.

11.3 Policy and Regulatory Considerations

The federal government may unveil additional housing supply initiatives in its upcoming budget, especially around rental construction and green housing retrofits. OSFI may also revisit the stress test guidelines to ensure they reflect current market realities, particularly if delinquency rates climb faster than anticipated.

12. Conclusion

The Canadian mortgage market in 2024 was a study in contrasts. On one hand, interest rates shifted course dramatically, providing relief for variable-rate borrowers and improving the prospects of new entrants. On the other hand, affordability remained a challenge, thanks to persistently elevated home prices, limited housing stock, and the hangover from previous rate hikes that left many households juggling increased debt loads.

Key Takeaways:

• Rate Cuts: The Bank of Canada’s five consecutive rate cuts totaling -175 basis points dominated market headlines.
• Regulatory Shifts: Removing the stress test for switchers and raising the insured mortgage cap to $1.5 million were game-changers.
• Housing Rebound: With average home prices rising 7.4% year-over-year by November, the market showed surprising resilience.
• Mergers and Acquisitions: Large bank deals (like RBC’s purchase of HSBC Canada) and broker channel expansions underscored an evolving competitive landscape.
• Challenging Renewals: A staggering $251 billion in mortgages renewed at higher rates, although cuts eased some of that pressure.
• Future Outlook: Heading into 2025, Canadians will watch closely for signs of additional rate cuts, new government interventions, and any shifts in economic momentum.

Despite the complexities, the overall trajectory heading into 2025 appears cautiously optimistic, driven by stable inflation, the potential for further monetary easing, and innovative policy measures. For prospective homeowners, mortgage professionals, and existing borrowers alike, staying informed and adapting to this rapidly changing environment will be crucial.

As the Canadian housing and mortgage ecosystem continues to evolve, understanding the interplay between interest rates, government regulations, and market conditions remains essential. Whether one is a first-time buyer, a seasoned homeowner, or a mortgage industry veteran, 2024 has reaffirmed an essential lesson: the mortgage landscape is fluid, and proactive planning is more vital than ever.

Disclaimer: This analysis is provided for informational purposes only and does not constitute financial or legal advice. Always consult with qualified professionals and consider your individual circumstances before making mortgage or financial decisions.

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