Metro Vancouver and the Fraser Valley have the lowest loan-to-value ratio in Canada, indicating average homeowners in those areas are primed to withstand inflationary pressures and the “coming storm,” according to a Re/Max Canada report released Tuesday.
“The Lower Mainland and Greater Vancouver are well poised from an overall ownership perspective to withstand any home value rebalancing that is an effect of higher interest rates and the Bank of Canada's desire to get inflation under control,” said Elton Ash, executive vice-president of Re/Max Canada.
A lower loan-to-value ratio, which indicates a homeowner owns a larger portion of their property, is a good measure of the ability to persist in the current economic environment, said Ash.
As of the third quarter of 2022, it stood at 50 per cent, down from 59 per cent in the third quarter of 2012, according to the report that pulled data from the Canada Mortgage and Housing Corp. and Equifax Inc.
This compares to 74 per cent in Calgary and 88 per cent in Regina, a high for Western Canada. Winnipeg was the only other major centre in the West to see its loan-to-value ratios drop since 2012, shifting to 78 per cent from 79 per cent.
The Re/Max report noted there’s been a “flurry” of new sales activity in B.C.'s Lower Mainland since the beginning of 2023.
Ash said buyers are becoming increasingly accustomed to the high-interest rate environment.
Many of these buyers are in the “move up” category and are looking to utilize equity gained in the past decade, he said.
“It is the ‘move over, move up’ [buyer]. It's that next-purchase kind of market that has seen the activity. The first-time homebuyer market is still very, very low, and that's to be expected,” Ash said.
The report also pointed to the transference of intergenerational wealth as well as the pandemic facilitating the ability to work in smaller or more remote markets as factors contributing to the downward pressure on loan-to-value ratios.
The mortgage delinquency rate has been low throughout the Lower Mainland and across other markets in Canada, the report said. Vancouver’s delinquency rate decreased to 0.08 per cent in 2022 compared with 0.29 in 2012 – among the lowest rates in the country.
The number of mortgage holders with credit scores under 660 has decreased from 7.4 per cent in 2012 to 4.2 per cent in 2022.
Those looking to purchase homes are taking advantage of options to extend or blend existing mortgages. For new mortgages, buyers are opting for shorter, fixed-term mortgages with the intention to “ride out” the high-interest rate environment, according to the report.
When it comes to sellers, the report said that some are offering assumable-mortgages or vendor take-back loans as purchase incentives.
While B.C. has seen many new rules such as the foreign homebuyer ban or the three-day “cooling off period,” the report said that these have merely complicated some transactions and that “business has remained steady.”
