First-time homebuyers still aren’t flocking to the market despite big-city price drops

House prices have been on a months-long slide across several major Canadian markets – but that still hasn’t seen a flood of first-time buyers stepping off the sidelines.

In Toronto, the MLS Home Price Index (CPI) composite benchmark, a key gauge of housing values in the city, fell by 5% last month, according to the Toronto Regional Real Estate Board (TRREB), while average selling prices were down 7.2% year over year.

Vancouver, meanwhile, saw its HPI composite benchmark slip by 3.4% compared with October 2024 and inch lower from the previous month.

But both those markets are still experiencing a deep freeze, with sales activity much lower than the same time in 2024 and little sign of a resurgence anytime soon.

First-time purchases still out of reach for scores of buyers

The main reason first-time buyers aren’t entering the market in droves despite falling home prices: those values are coming down, but they’re still prohibitively high for many young professionals in Canada.

That’s according to DLC Clear Trust mortgage broker Micky Khaneka (pictured top), who told Canadian Mortgage Professional those price drops – and the Bank of Canada’s series of interest rate cuts to date – still haven’t moved the needle for plenty of hopeful first-time buyers in Toronto.

“I feel like affordability still seems to be a lot of concern for the first-time homebuyers,” he said. “Even with lower rates, for the people who are most interested, unfortunately when you throw the stress test on there, there’s still a relatively high payment. Especially if it’s a single individual earning an average salary of $60,000 to $80,000 or $90,000.”

Canadians have had plenty to ponder about the economy in 2025. The trade war launched by US president Donald Trump at the beginning of the year has dominated headlines and sparked speculation of a potentially heavy hit to Canada’s economy as a result.

What’s more, Toronto’s condo market is still mired in crisis, with prices plunging and buyers often saddled with big losses – and plenty of regret – when closing time on their purchase comes around.

The Vancouver condo outlook may not be quite as bleak as in Toronto, but presale buyers there are also seeing challenges with appraisals frequently coming in well below the agreed price.

Buyer hesitation, caution continue to weigh against housing outlook

Amid that economic volatility, it’s perhaps no surprise that first-time buyers are hesitant to take the plunge, Khaneka said.

“For people who’ve been waiting on the sidelines, considering everything that’s coming up in the news and everything that they hear, they’re still hesitant because the consensus is that we’re probably going to see turbulent times for the next six to eight months before the market starts to come up, stabilize, or maybe even stop falling,” he said.

“Condos are a very scary part for most people because they’re just not sure. It seems like [the market] is in freefall at the moment and there’s not a light, at least in the near term, that makes people confident in a purchase – especially for first-time buyers. It’s a big purchase for them, so a lot are very hesitant or cautious before they make any decisions on that specific sector.”

That suggests it could take a calmer outlook for the condo market – and progress on the trade war question – before first-time buyers on the fence decide it’s the right time to make their move.

Canada Mortgage and Housing Corporation (CMHC) believes it could take years before demand begins to eat meaningfully into oversupply in the condo market, while there’s been no indication that a trade deal is on the way between the US and Canada despite months of negotiations and stalled talks.

“People don’t like making big decisions at times when there’s so much uncertainty,” Khaneka said. “And I feel like the uncertainty about everything around us from the economy to real estate is at an all-time high. And it makes people very, very nervous.”

CMP

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More BoC cuts could be ahead in 2026

Canada's monetary policy framework has fundamentally shifted. The Bank of Canada will move away from rate hikes and toward cuts next year as inflation stabilizes and employment concerns take center stage, according to IG Wealth Management's 2026 Market Outlook released this month.

The investment firm expects at least one additional 25-basis-point cut from the Bank of Canada in 2026, likely in March. This marks a clean break from the inflation-fighting stance that dominated policy from 2022 through 2024.

"Inflation control is no longer the binding constraint; employment is," the Outlook stated. The shift arrives as the United States Federal Reserve has already begun its own easing cycle, with expectations for four additional cuts through September 2026.

For mortgage professionals, the implications are straightforward: lower borrowing costs should continue flowing through the housing market. The outlook complements fiscal measures the federal government has announced, with Ottawa front-loading spending on housing, productivity and infrastructure.

This dual approach, where both monetary and fiscal policy support economic growth rather than restrain it, creates what IG calls a tailwind for the broader economy.

Philip Petursson, chief investment strategist at IG Wealth Management, said the combination of forces positions Canada favorably.

"Investors can expect the global economy to continue on a positive trajectory in 2026 as we move past the rolling recessionary environment of 2023 and tariff uncertainty over the last year," he said.

On the other hand, trade dispute continues to loom over the market and cloud the housing outlook, according to Royal LePage vice president, research and communications Anne-Elise Cugliari Allegritti.

“We’ve seen borrowing rates improve dramatically over the last two years and we know that in markets that have typically been very undersupplied, there’s lots of inventory available,” Cugliari Allegritti said. “All of those components are working in favour of buyers.

“What’s really holding them back is this uncertainty in the economy. There’s some hesitancy because of the trade dispute with the US. I think what’s really going to change that is some certainty, some sort of vote of confidence from our government that a trade deal can be made or is in the works.”

However, the Canadian dollar is expected to remain relatively stable, trading in a range between US$0.69 and US$0.71, offering predictability for cross-border transactions and trade relationships.

IG's analysis rests on what it identifies as four pillars: monetary easing from central banks, fiscal stimulus from governments, accelerating AI-driven capital investment, and a so-called wealth effect where rising equity markets boost household spending.

The wealth effect proves particularly relevant to housing markets. When stock portfolios gain value, households tend to increase discretionary spending and pursue larger purchases. The highest income quintile, which owns 85% of equities and drives roughly 40% of aggregate consumption, becomes the primary driver of this cycle.

CMP

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Ontario's mortgage crisis extends beyond Toronto as payments hit 50% of family income

The housing affordability crisis has moved beyond the Greater Toronto Area. A new Fraser Institute analysis found that mortgage payments on a typical home now consume more than 50% of median after-tax family income across all 14 of Ontario's largest urban centres, with Toronto reaching an unsustainable 110.2%.

"There is a perception that housing outside of the GTA is still somewhat affordable, but that's not true," said Austin Thompson, senior policy analyst with the Fraser Institute.

"Even in cities like Windsor and Kingston, buying a typical home would require a family earning the local median income to spend more than half of its after-tax earnings on mortgage payments."

The deterioration since 2014

The data reveals how quickly conditions have shifted. In 2014, the range across Ontario spanned from 21.1% in Windsor to 56% in Toronto. A decade later, Windsor had doubled to 63.2%, while Toronto more than doubled to 110.2%. All examined markets now exceed the 50% threshold.

Oshawa (92.2%), Hamilton (76.9%), and Barrie (74.7%) round out the top affordability challenges, suggesting the crisis has metastasized well beyond the metropolitan core.

Meanwhile, Ontario’s mortgage delinquency rate climbed to 0.23%, overtaking the national average for the first time since at least 2012. In Toronto, the rate jumped from 0.15% in Q2 2024 to 0.24% in Q2 2025. That's a 60% year-over-year surge and the highest level since 2012, according to the latest Residential Mortgage Industry Report (RMIR) from Canada Mortgage and Housing Corporation (CMHC).

Wages haven't kept pace

While home prices surged across the province, worker compensation stalled. Steven Globerman, Fraser Institute senior fellow and co-author of the report, noted this wage-price divergence as central to the crisis.

"Housing affordability is a function of both home prices and incomes, and as wages and incomes have flatlined across Ontario in recent years, housing unaffordability crisis has worsened," Globerman said.

"To make housing more affordable for Ontario families, policymakers should focus on increasing wages and incomes as part of the overall solution."

This policy recommendation marks a departure from supply-side arguments alone. The report suggests that income growth strategies merit equal consideration alongside housing construction initiatives.

According to the Pollara Credit Protection Insurance (CPI) Segmentation Study, 44% of mortgage holders reported that the current economic climate had negatively affected their personal finances, while 57% expressed concerns about job loss in the coming year.

The broader implication

With mortgage payments approaching or exceeding household income across the board, Ontario's labour market competitiveness faces pressure.

Prospective residents and young professionals increasingly face barriers to entry that transcend geography, complicating workforce attraction and retention across the province.

The Fraser Institute analysis tracked 36 Canadian metropolitan areas from 2014 to 2023, using median after-tax family income benchmarks and typical home prices to calculate affordability ratios. The methodology assumes a 20% down payment and 25-year amortization at prevailing mortgage rates.

The Fraser Institute study came in the wake of a Ratehub.ca analysis which found that 10 of 13 major cities saw borrowers require less income to purchase the average home, driven almost entirely by modest price declines rather than lower mortgage rates.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

No mortgage crisis ahead despite looming renewal wave

Canadian homeowners facing higher monthly payments when they renew their mortgage are handling that trend well – but there could still be speedbumps ahead with a slew of renewals coming in 2026.

That’s according to Canada Mortgage and Housing Corporation (CMHC), which painted a measured picture of that coming renewal wave in its latest residential mortgage industry report, released this week.

The national housing agency highlighted that while there’s been no mortgage crisis yet from renewals, there were still more than 750,000 mortgages scheduled to renew in the second half of 2025, followed by upwards of a million more next year and 940,000 in 2027.

Interest rates may have fallen recently, but the average five-year fixed uninsured mortgage rate was still 67% higher in July 2025 than the same time five years previously, when rates plunged amid the COVID-19 pandemic.

For now, borrowers are managing any higher-payment pain that’s arising. For the first time since 2022, the national mortgage delinquency rate fell in the second quarter although Ontario and British Columbia, the two priciest provinces for real estate, saw arrears climb.

Questions around a potential mortgage renewal “cliff” arose in 2023 and 2024, when a series of rapid interest rate hikes by the Bank of Canada first sparked concerns that many borrowers would prove unable to handle the jump in payments.

However, the central bank has since cut rates nine times, improving the outlook somewhat even though borrowing costs remain much higher than they were five years before.

Brokers urge proactive approach to manage renewals

Mortgage brokers are also taking a calm view of the market as 2026 looms into view. Victor Tran (pictured top), a mortgage agent with Tango Financial and RATESDOTCA housing and mortgage expert, told Canadian Mortgage Professional it’s essential for borrowers to shop around as early as possible when their mortgage is coming up for renewal.

For some lenders, turnaround times can be slow because refinance transactions and mortgage transfers from one lender to another simply aren’t a priority compared with the purchase side.

“So it’s important for Canadians to shop as early as possible so they have enough time to complete a mortgage transfer should they find a lower rate elsewhere,” Tran said. “Most people, unfortunately, still wait until the last minute.

“We’re talking about a couple of weeks or even a month before the renewal day. Start shopping around and by then it might be a little too late – but not impossible. You can still transfer to a different lender for a lower rate.”

But borrowers who don’t give themselves enough time to begin that process can complicate things: firstly, they would likely have to renew with their current lender into an open term to buy themselves some more time to complete the mortgage transfer.

“It’s just a little messier, a little bit more interest that they have to pay going into an open mortgage because open mortgages have full flexibility to pay out at any time with no penalty,” Tran said. “But the rate’s a lot higher so it’s always best to avoid that by just starting early.”

Delinquency trends suggest strain will remain contained

For now, there doesn’t appear to be any sign that a mortgage renewal meltdown is ahead. Mortgage delinquency rates are still lower than those in other credit products – unsurprisingly, as mortgage payments are normally a top priority for borrowers.

That said, delinquency rates for Canadians who hold mortgages are increasing at a faster clip than for those who don’t, including credit card, auto loan, and line of credit arrears.

Another delinquency trend of interest to the mortgage space: in the mortgage investment entity (MIE) sector, delinquency rates of 90 days or more fell in 2025’s first quarter compared with Q4 of last year, although they were still higher on a year-over-year basis.

The same couldn’t be said for chartered banks and credit unions, where delinquency rates increased but were still lower than pre-pandemic levels.

CMP

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Home sales edge higher across Canada in October

Canadian home sales saw a modest uptick in October, with activity edging up 0.9% month-over-month according to the Canadian Real Estate Association (CREA).

The increase marked the sixth monthly gain in the past seven months, signaling renewed momentum after a brief pause in September.

However, the market remained softer than a year ago, with actual sales down 4.3% from October 2024 and the national average sale price slipping 1.1% to $690,195.

CREA’s senior economist Shaun Cathcart said the latest figures suggest a market gradually regaining its footing.

“After a brief pause in September, home sales across Canada picked back up again in October, rejoining the trend in place since April,” Cathcart said.

“With interest rates now almost in stimulative territory, housing markets are expected to continue to become more active heading into 2026, although this is likely to be tempered by ongoing economic uncertainty.”

Supply remained tight, with new listings down 1.4% month-over-month. The sales-to-new listings ratio tightened to 52.2%, inching closer to the long-term average of 54.9%.

Inventory levels held steady at 4.4 months, the lowest since January, and below the long-term average of five months. At the end of October, 189,000 properties were listed for sale, up 7.2% from a year earlier but still in line with historical norms.

CREA chair Valérie Paquin pointed to signs of pent-up demand building ahead of the traditionally quieter winter season.

“As we head into the quiet winter season, we continue to see clues that underlying demand for housing is picking up steam,” Paquin said.

“All eyes will be on next year’s spring market to see if all that pent-up demand will finally come off the sidelines in a big way.”

Market watchers noted that the National Composite MLS Home Price Index edged up 0.2% month-over-month, though it remained down 3% year-over-year. That's the smallest annual decline since March.

The sales-to-new listings ratio and months of inventory both indicated a market hovering in balanced territory, with neither buyers nor sellers holding a decisive advantage.

While Canadian home sales in October remained below last year’s levels, steady monthly gains and tightening supply suggest a market poised for increased activity in 2026, provided economic uncertainty don’t derail the recovery.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!