Immigrants who renew their mortgages allocate significantly more of their income to housing than Canadian-born individuals.
Fifty-six percent of immigrant homeowners renewing their mortgages this year allocate between 50% and 70% of their income to housing, compared to just 35% of Canadian-born homeowners, according to an analysis published on August 20 using data from the Bank of Canada. The gap is not new, but it is more pronounced this year because a large wave of mortgages signed during the pandemic is now expiring.
Why do newcomers find it harder from the start?
A Statistics Canada study, published in June, compared first-time homebuyers who were recent immigrants with first-time buyers born in Canada and found that, in British Columbia, recent immigrants paid more for their homes relative to their income: a price-to-income ratio of 4.93, compared to 4.35 for native-born homebuyers. Furthermore, in the year of purchase, recent immigrants contributed significantly less to their RRSP (Registered Retirement Plan) than their Canadian-born counterparts—just 16.8% compared to 36.1% in British Columbia—leaving them with less savings to absorb a shock like the current one. By 2023, immigrant homeowners under 35 were already carrying an average mortgage debt of $450,000, compared to $265,000 for their Canadian-born peers.
What’s happening this year with renovations in general?
Nationally, about 12% of all outstanding mortgages in Canada are due to expire between this year and next, and 82% of those who have already renewed have encountered a higher interest rate, most with increases between 2% and 5%. According to the same analysis, the average mortgage payment rises 15% after renewal, just as home prices have fallen nearly 20% from their 2022 peak, reducing homeowners’ ability to access home equity financing if needed. A separate survey, published in June, found that 67% of new homeowners in Canada face or would face difficulty making payments if their monthly payment increases by 15%, and that 53% rely on rental income to support their home—nearly double the 29% of recent first-time homebuyers overall.
What can a Latino family do that is about to renovate?
Mortgage advisors recommend starting to compare rates four to six months before your current mortgage expires, rather than waiting for the bank’s letter, because that allows time to negotiate with other institutions. As the mortgage industry itself summarized: “The pressure to renew isn’t just about the interest rate. It’s about how much leeway each household has to absorb a higher payment.” For those who recently arrived in Canada and are still building that leeway (savings, credit history, stable income), it’s wise to speak with a mortgage advisor or a community financial counseling service before signing a renewal without consulting anyone.
Mortgage payments are rising again for almost everyone this year. The difference, according to this data, is that some people are facing this increase with more savings than others.
Editorial Staff Mauricio Navas Talero LJI Reporter