Can Canadian homeowners stay on top of mortgage payments in 2024?

TD economist says despite rising costs, most people are riding the waves

Can Canadian homeowners stay on top of mortgage payments in 2024?
Steve Randall

For many Canadians, the monthly mortgage payment is their largest single expense, but with rates having soared in the past two years, can they remain on top of their finances?

TD economist Maria Solovieva, CFA, has shared her insights about the challenges, with 50% of mortgages initiated before interest rates began rising almost two years ago facing higher rates by the end of the year.

With millions of homeowners finding renewals are up 30% on average by the end of 2024, can these households cope?

“We estimate that increased mortgage payments have already reduced real consumer spending,” said Solovieva. “Our earlier report, which uses internal data, suggests that growth in real consumer spending would have been at least 0.4 percentage points higher in 2023 in the absence of higher mortgage rates.”

This will continue to impact consumer spending and economic growth in the year ahead, although the individual impact will depend on the type of mortgage and of course, their circumstances.

On aggregate, mortgage payments growth is forecast to slow next year, remain relatively flat in 2025 but pick up again in 2026, even if Canadian economy falls into a mild recession in 2024.

“We estimate that overall growth in mortgage payments for the country as a whole is 19.4% in 2023 and an additional 3% in 2024, with little growth in 2025,” the economist writes in the report.

The importance of the stress tests that mortgage borrowers face is acknowledged, with 70% of mortgages initiated in the past five years included, and with the labour market remaining resilient, Solovieva is not expecting a major issue for the Canadian economy related to mortgage payments in 2024, especially given an estimated $140 billion in untouched excess deposits.

“Without an unexpected economic downturn, the mortgage renewal cycle is unlikely to trigger an economic crisis. We expect that any slowdown in the job market will not be as severe as past economic downturn,” she concluded.