Estimate: 10% of the GTA Won’t Be Able to Refinance Their Mortgage in 2027

Ben Rabidoux explains the recent Bank of Canada estimate and the important difference between renewing and refinancing a mortgage.

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One of the things that came out from the Bank of Canada just last week is that they estimate that, um, 10% of all homeowners will not be able to refinance their mortgages in kind of Toronto, to a lesser extent Vancouver.

So what does that mean? That does not mean that they cannot renew. There’s oftentimes a, some, just some confusion between the terms renewal and refinance. They’re gonna renew the mortgage just fine. Canadian banks are very good. If you’ve made your payments, they’ll, they’ll they’ll give you a new mortgage.

What it does mean, however, is those borrowers will have a much harder time switching lenders to capture lower rates at renewal. And I think more importantly, it really will limit their ability to refinance and take money out in the event that they actually run into problems financially. So, so now the ability to consolidate high interest debt into your mortgage is gone ’cause you can’t refinance, you can’t pull equity out to kind of stay afloat.

So it just adds a layer of vulnerability onto the market. And so I, I think all else equal, when you get house prices decline, it tends to, um, remove some of those kind of safety nets for homeowners and, and all else equal will lead to kind of just a grind higher in delinquencies.

No, I agree. You know, you made such an important point there. There was a lot of confusion when that announcement came out. Even members of the media were saying, “Oh my gosh, we could have 10% of people being, in essence, forced to sell their home.” But to repeat what you said, that’s not the way this is going to work.

They just lose flexibility in terms of shopping for the lowest rate or adding more to their mortgage and so on and so forth. But it’s certainly a sign that the economy is challenged, and of course, the higher rates are playing a big role here, too.