2025 Mortgage Market Predictions
As we approach the new year, experts are weighing in on what to expect from the mortgage market. Robert McLister, a mortgage strategist and interest rate analyst, shares his predictions for 2025.
1. Loan-to-Income Ratios: A Growing Concern
Loan-to-income ratios (LTI) have been increasing steadily over the past few years. In 2025, this trend is expected to continue, with many borrowers struggling to keep up with their debt payments. As a result, lenders will become more cautious when approving mortgages, and LTI will likely play a larger role in determining mortgage eligibility.
2. Debt-Service Ratios: A Record High
While debt-service ratios (DSR) have declined slightly over the past year, they remain near record highs. This suggests that many Canadians are still carrying high levels of debt, including non-mortgage debt such as credit cards and auto loans. As a result, some borrowers may find themselves priced out of their current neighborhoods, leading to an increase in migration to more affordable areas.
3. Switch Volumes Surge
With the majority of Canadian mortgages up for renewal in 2025, many borrowers will be looking to take advantage of better interest rates elsewhere. This is expected to lead to a surge in switch volumes, as borrowers comparison shop and exploit new rules that permit switching lenders without having to pass the federal mortgage stress test.
4. Cross-Selling Drives Rate Competition
Deposit-taking lenders have been increasingly willing to sacrifice upfront interest revenue in order to cross-sell other financial products such as savings accounts, credit cards, and insurance policies. This trend is expected to put pressure on monoline lenders that don’t offer a range of financial services.
5. Payment Shock Awaits Canadian Mortgagors
When renewing their mortgages in 2025, many Canadians will face rates that are significantly higher than their previous deals. In an attempt to lower monthly payments, borrowers will comparison shop and seek out better interest rates elsewhere. This is expected to lead to a increase in mortgage musical chairs, as lenders sharpen their renewal rates to keep customers in-house.
Conclusion
While these predictions don’t go too far out on a limb, one thing is certain: 2025 will bring plenty of surprises for the mortgage market. With loan-to-income ratios and debt-service ratios continuing to rise, and cross-selling driving rate competition, borrowers would do well to stay vigilant and plan carefully.
Robert McLister’s Background
Robert McLister is a mortgage strategist, interest rate analyst, and editor of MortgageLogic.news. He can be followed on X at @RobMcLister.
Mortgage Rates in Canada
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