A new report from Re/Max Canada shows that the Greater Vancouver and Toronto housing markets have the lowest loan-to-value ratios in the nation despite having the highest home prices.
As of the third quarter of last year, the loan-to-value ratio averaged 50% in Vancouver and 53% in Toronto, lower than the national average of 57%, according to the report, released Tuesday.
Regina and Edmonton had the highest loan-to-value ratios of 88% and 83%, respectively, the report said.
The loan-to-value ratio compares a mortgage to the value of a property. Lower ratios are generally considered less risky because they mean a higher percentage of the property is owned by the homeowner.
Chris Alexander, president of Re/Max Canada, said the figures for the country’s most expensive regions “look good.” The reason is mainly he has three factors. The ability to move to cheaper areas due to skyrocketing housing prices and a growing workforce over the past decade. As remote work becomes more prevalent, Bank of Mom and Dad says: Yahoo Finance Canada.
The relentless rise in home prices (until very recently) had made it really difficult for many Canadians to enter the market, but at the same time, rising real estate prices put many long-term homeowners’ loans at risk. Helped to apply downward pressure. ratio of values.
According to the report, the eight markets Re/Max has tracked over the last 10 years have seen a 67% decline in loan-to-value ratios.
The biggest improvements were seen in London, Moncton, Halifax and Hamilton.
The four markets where loan-to-value ratios have deteriorated over the past decade were in two Prairie states.
Mortgage stress tests conducted by the Office of Financial Institutions Supervision have also helped provide a financial cushion for many homebuyers, Alexander says.
“While it has been cumbersome for the real estate industry and even for many homebuyers, it has helped ensure responsible lending practices and give people peace of mind when managing payments.
Finances Still Stretching for Some Homeowners
Despite the report’s rather positive findings, there is no doubt that the rapid rise in interest rates has been painful for some homeowners, especially those who opted for variable mortgages when rates were super low.
“I think it’s all about context, right? Sure, there are certainly a lot of people who are overstretching themselves and what they have, but the majority of the story is that the changing interest rate environment is I got my first mortgage five years ago or went to a private lender,” Alexander said.
“I think most of the stories come from there, but they don’t constitute a huge part of the market right now.”
The report also found that Bank of Mom and Dad had cut back from higher interest rates after taking out sizable loans in the form of home equity lines of credit to help children buy homes. He admitted that he may be feeling a pinch.
But Alexander says many parents who have helped their children are likely to be “much better positioned” to endure a higher rate environment.
“They have accumulated wealth over their lifetimes. They are better able to weather debt storms than the typical first-time homebuyer because they have other assets or It could have weathered any storm because it could have had a higher income at home,” he said.
“What I have noticed is that the tragic story has certainly come to the forefront. have very sound fundamentals in their homes.”
Michelle Zadikian is a Senior Reporter at Yahoo Finance Canada. follow her on her twitter @m_zadikian.
