A new report from Mortgage Professionals Canada reveals that 37% of first-time home buyers who purchased within the past five years regret the size of the mortgage they took on. The study, based on consumer survey research conducted by Bond Brand Loyalty Inc. in February, highlights the strain of the ongoing mortgage renewal wave as borrowers face higher payments.
Renewal Anxiety and Financial Strain
Among recent first-time buyers, two-thirds (67%) are anxious about renewing at a higher interest rate. More than half (53%) reported they are either already struggling with payments or would struggle before payments rose by 15%. In contrast, among all mortgage holders expecting to renew within the next 12 months, only 29% regret their mortgage size, though 67% are worried about higher rates.
“These findings show how uneven mortgage-market pressure has become,” said Maxime Stencer, chair of the board of Mortgage Professionals Canada, in the press release. “Recent buyers and newcomers are often among the most exposed because they entered the market at higher prices, with larger obligations and less room for error.”
Newcomers Hit Harder
Mortgage renewal pressures are particularly severe for newcomers to Canada. According to the report, 67% of newcomers reported they are either already struggling or would struggle before payments rose 15%. Additionally, 53% of recent first-time buyers who are newcomers have rented or plan to rent part of their home to afford ownership, compared to 29% of all recent first-time buyers.
Market Context and Arrears
The last of the five-year, fixed-payment home loans taken out during the COVID-19 pandemic are set to renew over the next 12 months, according to recent research from the Bank of Canada. On average, these mortgage payments are expected to jump by about 15%. The central bank’s report noted that mortgage arrears remain relatively low but have risen among borrowers with large balances relative to income, particularly in Toronto for mortgages taken out in 2022 and 2023.
Rental Income and Homeownership Confidence
To cope with higher payments, a growing number of homeowners are renting out parts of their property. More than one-third of Canadians said they need to rent part of their home to afford ownership, up from a quarter in 2021. Despite these pressures, confidence in homeownership remains strong. Only 32% of non-homeowners said they never expect to own a home, down significantly from 51% in 2023. About three-quarters of all respondents felt that real estate in Canada is a good long-term investment and classified mortgages as “good debt.”
