Average Payment for a New Mortgage In Toronto now Exceeds $3000 per Month
When a first time home buyer tells you: “Its hard to get into the real-estate market”, believe them.
New data from the CMHC reveals that the average monthly payment for a new mortgage in Toronto has reached a new all-time high at $3,166 per month.
Given that this doesn’t include property tax, insurance, condo fees, heating or hydro, its no wonder that housing affordability in Canada is at an all time low.
10 Years Ago, The Typical Payment for a New Mortgage In Toronto Was $1,510 / Month
If we go back in time to Q1 2014, we find that the average monthly mortgage payment in Toronto was $1,510 per month — a full 50% lower than today.
This stellar rise can be attributed to both rising housing costs in the Toronto area and increasing interest rates; during this 10 year period, housing prices in Toronto have more than doubled, and interest rates have also increased from 1% to 5%.
Payments Rising 4x Faster than Inflation
Using the Bank of Canada’s inflation Calculator we can determine that $100 in 2014 dollars would be worth $127 today.
If mortgage interest costs had stayed in line with CPI, a typical Toronto mortgage payments would be $1,917 per month.
In reality, monthly mortgage payments have increased 100% since 2014 — this means mortgage interest expense is rising at nearly 4x the rate of inflation.
Costs Are Putting the Squeeze on First Time Homebuyers
According to Bank of Canada, 44% of all mortgages taken out in Canada are taken out by first-time homebuyers.
They represent an outsized proportion of new mortgage holders, and they are, therefore, paying a disproportionate amount of cost burden related to these increasing mortgage interest costs.
First-time homebuyers often dont have the luxury of large downpayments or HELOCS to draw from in an emergency, as is the case with investors.
The Net Result?
Unsurprisingly, real-estate sales are slumping across Canada, construction is shifting away from single family detached homes to apartments, and Canadians are moving to lower cost jurisdictions.
First-time homebuyers in Toronto are looking for price relief anywhere they can find it — and with mortgages in Toronto costing $3100 per month, who can blame them?
