What could we expect from mortgage rates in 2020?

This year was full of surprises for the national mortgage market. A recent report by the British Columbia Real Estate Association (BCREA) shows how the year started with a growing vector of Canadian yield curve and forecasts of rate increases from the central bank.

However, as the yield curve got different and the Bank of Canada kept the rates unchanged, we’ve seen certain volatility in mortgage rates, supported by the US-China trade war and other factors from outside.

And what can we expect from the next year?

Mortgage stress test worsens housing supply issue and makes homes even less affordable

Today, Canada is showing sustained economic and strong population growth. Millennials and new Canadians are creating households and they express strong desire to have their own real estate, especially amid low interest rates. It seems that with such conditions we should see growing home sales and supply increasing alongside demand, supporting the prices at normal levels. However, the real estate supply is restrained and home prices are growing sharply in the major markets.

Michael Bourque, CEO of the Canadian Real Estate Association, blames the government for it. In his opinion, a strong focus on lowering household debt has dominated the policy, while the main reasons of this undersupply (excessive red tape, fees, taxes and nimbyism) are almost not affected.

In case we want to solve the housing affordability issue in Canada, governments need to review their policy mix and address those reasons, starting with a more flexible mortgage stress test.

First of all, it’s necessary to view mortgage debt in the Canadian context. Canadian consumers show some of the highest rates of home ownership and mortgage borrowing in the entire world. Nevertheless, Canadians use their mortgage debt responsibly with making additional payments or accelerating paying off in other ways.

Next year could be crucial for some Canadian borrowers

The recent report by TransUnion Canada says the outstanding credit card balances have exceeded the $100-billion level in Q3. It’s the first time on record, meaning Canadian borrowers keep piling up debts on the wave of extremely low interest rates.

Overall, Canadians keep managing their debts. Nevertheless, it’s important to pay attention to one certain report finding. A warning sign is growing non-mortgage delinquency rate – it was up by almost 0.26% to 5.54% in the third quarter. Although it’s not a significantly high number, it’s still growing.

As previous reports by TransUnion show, in case Canadian borrowers face financial issues with credit cards, auto loans and mortgage payments, they tend to miss their credit card payment first, and manage the others.