Nearly one in 10 Toronto mortgage holders won’t qualify to refinance next year
The Bank of Canada says that the city’s tumbling real estate prices have resulted in less equity and leverage for homeowners
Toronto homeowners remain some of the country’s most vulnerable borrowers, according to a recent Bank of Canada report. The new study estimates that roughly nine per cent of Torontonians with mortgages won’t qualify for refinancing next year—more than double the percentage of Canadians as a whole.
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“Strong income growth over the past five years should allow most borrowers to manage payment increases,” the Bank of Canada said. “But those with weaker income growth may have less flexibility.” Borrowers often need a certain amount of equity in their homes in order to refinance, and years of deflating home values in Toronto have eroded that cushion.
Earlier this month, the Toronto Regional Real Estate Board put the average home price in the city at $1.07 million, down roughly 20 per cent from the market peak in early 2022. In the condo market, falling prices and sluggish sales have pushed some developers to offer steep discounts.
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The Bank of Canada goes on to warn that the situation could get worse if prices continue to fall. A 10 per cent drop in home values would increase the share of Toronto borrowers unable to refinance at renewal to 12 per cent.
These findings expose a duality in Toronto’s housing market. Lower home prices have come as a relief to buyers, but they have also left many owners in a precarious position. For those who bought near the market peak, a weaker housing market could prove almost as problematic as higher interest rates.
Zakiya Kassam is a writer and fact checker whose work has appeared in Post City Magazines, This Magazine and Now Toronto. She was previously the associate editor at Storeys.
