Happy Holidays & 2024 Mortgage Market Predictions

Think today's mortgage process is complicated and stressful. You're right, it is. But it doesn't have to be. This is the House Rich podcast and we've simplified the mortgage process. Your host, Matt Parker, AKA Mortgage Matt, delivers practical advice in a fun and entertaining way to help you understand your mortgage so that you can start making money, not the bank. So let's get your homeownership journey started. Here's your host, Matt Parker.

Hey, Matt, here, you know, happy holidays. I want to wish you, you know, Merry Christmas, whatever holiday celebration that, that you celebrate as a family. I hope it's a wonderful time. I hope you have time to get away, you know, spend more time together, more relaxation and just enjoy the time and peace and slow down a little bit because I know it's so busy over the year. I know I'm looking forward to spending more time with the kids with Sarah and taking a little breather from the hockey world with the kids hockey at that time and just, you know, taking it easy a bit more and ramping up and getting ready for the new year, which is always an exciting time. And I always love that time with the opportunity that it holds and, you know, the excitement around that. So please enjoy it and get out, take a look at some lights, get involved in some festivities. We've included quite a few potential ideas down below in the newsletter, so hopefully that helps, you know, find something that suits you and your family. And in terms of next year, it'll be an interesting year. I think we'll have to see what happens with this renewal wave coming for a long time. These rate hikes and rate changes over the last few years now haven't impacted large scale amount of people percentage wise. In terms of homeowners, you know, we still have the segment of the market which is, you know, let's say 30 to 40% that have no mortgage or they have clear title homes. So they won't have any impact regardless of this renewal wave. But there's a lot more people that are coming up to renewal than we've seen in, you know, the months past with 300 billion up for renewal next year and in 2024 across Canada. So there should be a decent amount of percentage in Vancouver, greater Vancouver area and from that, if they're moving from a low tube plus percent interest rate into a higher 5, 6 plus percent interest rate and you know, there's going to be some payment changes and significant payment increases in those situations. So one thing to watch for with that is, you know, there's a Lot of. There might be some people that may not requalify for the same mortgage that they have because of the fact that qualification is actually a lot harder today than it would have potentially been five years ago, based off of the stress test at the moment. So it'll be, it'll be, it'll be interesting to see how that's handled with banks at renewal. Do they try to take advantage of that and potentially offer higher interest rates at renewal to see if they can, you know, get clients to lock in at what's more favorable to them from a spread standpoint in terms of their metrics? Because. Because they know that they might not have the ability to move over. There was a recent article about deleveraging mortgage portfolios across the major institutions, meaning not renewing mortgages. Now, if anyone's made payments or kept up with payments. We've never seen it where there hasn't been a renewal offer presented, but there is some speculation around some strategies around deleveraging. So for me it's. Is that a, is that a situation where lenders will offer higher interest rates just to, not necessarily deter, but you know, if they want to stay, here's what's offering to them because they may know that there isn't another opportunity to move elsewhere based off of that, to move to a different lender. Right. If you renew it with the existing lender, don't have to requalify. If we move to a new lender, keep the mortgage the same. Doesn't matter if we increase the mortgage amount. Whatever the situation, it has to get re qualified and restructured based off of today's qualifying criteria. Now, oftentimes restructuring at renewal makes sense because there's great opportunity there to access equity. You know, looking at investment opportunities, creating tax deductibility, all these different things that this renewal opens up in terms of opportunity, debt consolidation, preparing for the next purchase, adding a line of credit for home renovations in the future. All of these different situations which make it very favorable to refinance a lot of the time. Will that be impacted with the less ability for certain people to move because of the fact that qualification is harder than it would have been when they originally got the mortgage. That'll be something to watch out for. With the additional an increased amount of homeowners coming to renewal, are they now more open to listing and buying that next property? You might be a situation where they've waited until this time because they didn't want to lose their existing rate or they didn't want to tackle that when they thought Rates weren't very favorable. And now that everyone's sort of normalizing and getting used to this higher rate market and they've already been reset at a higher interest rate at renewal time, are they more comfortable going to market and listing their property to then purchase their next, next home that they would like to move into? So that's another, another situation that could happen. And then there might be a percentage of people that these payment challenges are too much. And I hope that's not the case. I hope there's not, you know, an increase in mortgage defaults and not being able to pay mortgages. But, you know, it's definitely a concern given where rates are today and where they were and increases in payments that we might see, especially with, you know, mortgage holders that have a static variable that potentially could be a negative amortizing situations where the balance is growing and as they get to renewal, they actually have a higher balance and, and a higher rate and a significantly higher payment. So that's that. Those are all things to look at. But in terms of home values, because there's still such a lack of housing supply, I mean, long term, it looks like there's still upward pressure on housing prices just because of that. There's all those different rezoning policies that are being pushed through at a relatively rapid pace which will rezone all single family homes across British Columbia. And there's going to be a lot of rezoning and things happening across Canada in different markets. So with that, it'll be, you know, what will happen to watch with that is does that impact home values? Because now they're, you know, could be redeveloped, there might be some increased density allowed on that property. Does that, you know, open up opportunities for certain people to sell properties? Do you know, home builders get back into the market a little more aggressively as things settle down and normalize because of these new rezoning, rezone property opportunities. And what does that do in terms of the shaping of the neighborhoods and housing supply moving forward? Does it actually help? You know, I think it's probably a very long drawn out process to, you know, get back to a place where we have enough housing. And, you know, it's one of those things where it just may never happen just because we're in a difficult situation at the moment. And but those are things to look out for with all these different changes coming. Does that spark the market? Because right now, if I'm looking at purchasing a property, these next next few months present to me some very good opportunity, little bit subdued real estate market Meaning you can be a bit more aggressive, potentially less competition. In certain areas and segments there's still lots of competition, but in some there's, there's not as much competition. So if you find the right place, it can be a very good opportunity, very good time to purchase. So that's, you know, if, if, if I was looking at potentially purchasing myself personally, I like these winter months, especially in a market conditions like this where there's less people out there competing with you. Now as that changes as we move into the spring market, that could very quickly shift the other direction. The big unknown is all of these renewals coming, a large percentage of them in the second quarter, third quarter of next year sort of aligned with the spring purchase market years back. So you know, will that have an impact on, on these things and time will tell what that actually looks like. And as we get to that place mid year, have we started to see the bank of Canada cut interest rates? You know, with cutting interest rates and lowering borrowing costs and you know, making it look more favorable again to, to get into the market just from a rate standpoint and just from a sense of comfort standpoint, knowing that we're not at this increasing rate point and we're at, we're at the, actually on the other end of the cycle, which is a downward end or downward side of it. There could be more buyer confidence or more willingness to get into the market from that point, which could create more, create more demand and competition which could then again create more of an upward pressure on real estate prices. So lots to track, lots to keep an eye on. We'll watch to see if bond yields continue to improve, pushing downward pressure on fixed rate mortgages, which will be well received and I think very helpful in a lot of situations, especially with renewal time, if there are a lot of people that want more of that security of a fixed rate mortgage. Or do we take the opportunity to look at with bank of Canada potentially cutting interest rates, that variable doesn't look as scary today as it would have, you know, a year from, a year back from now. So, you know, lots of things for us to tackle and take and take a look at as we move forward into the, into the new year. I wish you a wonderful holidays with your friends, families, loved ones and a prosperous new year. And thank you for your trust and the opportunity to help guide your homeownership and mortgage financing. Any questions you have, let me know. Always here to be of service. Thanks. Bye bye.

Thanks for listening to the House Rich podcast with Matt Parker. We hope you enjoyed this episode. For more information and resources to get you started on your homeownership journey, visit www.mattparker.ca and don't forget to rate and review this podcast. Thanks again for listening.