37% of recent first-time buyers regret the size of mortgage they took on, says new report

A 'sold' sign in front of newly built homes in Vaughan, Ont. Photo by Cole Burston/Bloomberg files

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Five years after homebuying activity hit unprecedented heights amid record-low, pandemic-era interest rates, the ongoing mortgage renewal wave is putting borrowers managing higher payments under pressure, according to a recent report from Mortgage Professionals Canada.

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Among first-time home buyers who bought within the past five years, two thirds are anxious about renewing at a higher rate, and 37 per cent regret the size of mortgage they took on, according to the report, which used consumer survey research conducted by Bond Brand Loyalty Inc. in February.

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And more than half (53 per cent) reported they are either already struggling or would struggle before payments rose 15 per cent.

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“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.”

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In comparison, among the third of all mortgage holders who expect to renew their home loans within the next 12 months, 67 per cent are worried about renewing at a higher rate but only 29 per cent regret the size of the mortgage they took on. About six per cent of all mortgage holders said they are already struggling with their payments, while 44 per cent said they would have difficulty if payments rose by less than 15 per cent.

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Mortgage renewal pressures are hitting newcomers to Canada even harder, with 67 per cent reporting they are either already struggling or would struggle before payments rose 15 per cent.

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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 per cent.

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The central bank’s report said mortgage arrears remain relatively low so far but have risen among mortgage holders with large balances in proportion to their income. Toronto borrowers who took out a mortgage in 2022 and 2023 are particularly stressed.

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Perhaps as a result, a growing cohort of homeowners are renting out parts of their property to generate extra income so they can afford their mortgages. More than one-third of Canadians said they need to rent part of their home to afford ownership, up from a quarter in 2021, according to the report.

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Among first-time home buyers who bought within the past five years, 29 per cent have rented or plan to rent part of their home. while about 53 per cent of those new to Canada reported the same.

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Still, confidence in homeownership remains strong, according to the report. Among non-homeowners, only 32 per cent said they never expect to own a home, which is down significantly from the 51 per cent who said the same in 2023. About three-quarters of all respondents felt that real estate in Canada is a good long-term investment and a similar proportion classified mortgages as “good debt.

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