What Happens To A Mortgage If The Housing Market Crashes?

Housing market crash
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Is the housing market going to crash in Canada? If you enter “Home prices in Canada” into Google—you will find endless headlines related to real estate collapse.

But according to mortgage professionals, although prices are declining, still it is high compared to the past years. So, what is actually happening in Canada’s housing market, and how will it affect your mortgage?

Well, there is lots of confusion related to it. But don’t worry. Here, in this article, you will know all the essential facts about the housing market crashes in Canada. So, let’s dig into it!

Is the housing market crashing in Canada?


With increasing the rate of interest, housing prices across Canada have started to fall in recent times. Although, according to the experts, in comparison to 2021, the prices are higher at the current time. 

The Canadian Real Estate Association states that in April 2022 —the average national house price is about $746,000—which is 7.4% higher than in April 2021. And this is value, despite the higher rate of interest in the housing market.

For example, in The Great Vancouver Area, the detached house prices rate has decreased to 0.4% since April. But the rate is still more than 15% higher than the previous year in the same time.

And for the attached home, despite lowering the rate to 0.6%, it is 21.5% high in comparison to May 2021. It is informed by the Real Estate Board of Greater Vancouver.

Although, in the Greater Toronto Area (GTA), 4,912 homes sold in July, a 47% decline from July 2021, according to the Toronto Regional Real Estate Board (TREB).

What are experts saying about this housing market crash?


According to the experts, Canada’s mortgage industry will not face any housing crashes in the coming years. They also explain to the Canadian mortgage professional that the low-rate condition at the start of the corona pandemic has enhanced the inevitable drop in the housing market. And it is now recovering to its normal state.


Christelle Mwamba, a mortgage agent, said they are not going to crush, and it is just a correction. And instead of focusing on the headlines, people should focus on the knowledgable facts. 


What will happen to home appraisals amid this housing market volatility?


The volatility of Canada’s housing market is now a major issue for house owners and brokers as well. The home appraisal may reduce dramatically than the agreed price or the listed value. According to Home Value Inc., it is also applicable to people who agreed on the buying prices recently.


Although the home prices increasing over the last few years, in the Greater Toronto Area (GTA), some places have seen a three-month decline in house values.


For instance, the average value for houses in GTA was $121,000 in May. Compared to three months ago, that is a significant reduction.

What should you do to your mortgage if the housing market crashes?


With the volatility of Canada’s housing market and a significant decrease in the home appraisal, the best solution is to take help from the real estate lawyer or the realtor. They will guide you on whether you can whittle down the property value or not. It is especially for the people who can’t manage to secure enough mortgage to cover the payments of their property.


If you need an appraisal for a property you want to refinance, in that case, you have to make your house looks presentable and approachable. According to the mortgage specialists, if a potential appraiser is visiting your property, you must highlight the home’s features.


Sometimes brokers also offer an automatic valuation model or AVM. It will be suitable for you if you have a plan for refinancing or require less than the property price for your mortgage. Suppose the property price is $1.15 million, and for the mortgage, you need around $400,000. Now, what you can do is, value your property at less than $1 million. 


It, in turn, secures your AVM instead of going for an appraiser. This is practically a good option. As, sometimes, you have to wait for a suitable appraiser due to the current market condition.

Bottom line

You should know the housing market in Canada varies among different cities and provinces or even in the neighbourhood. And the recent challenges and global pandemic situation have created a tough situation for brokers and sellers. So, the best decision is to hire a professional Realtor who will guide you through the whole process.


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