Canadian Mortgage Market 2021: The FOMO Year

2021 was a record year for Canadian housing. The national MLS Home Price Index rose 26.6% year over year in December, a record annual gain. The average sale price in the GTA reached $1,095,475 for the year. Many buyers waived conditions and made offers above asking in multiple-offer situations.45

The Bank of Canada held its overnight rate at 0.25% through 2021. By the time of this update, the Bank had raised it. See the Rates section below.3

The Buying Frenzy: Numbers and Psychology

National home sales in 2021 totalled 666,995 units, more than 20% above the record set in 2020, according to CREA.4 In the GTA, TRREB reported 121,712 sales, up 28% from 2020.6 Calgary sales were about 72% higher than in 2020, with 27,686 units sold.7

Prices rose at a similar pace. The composite MLS Home Price Index was up a record 26.6% year over year in December 2021, and it rose 2.5% from November.5

Supply was tight. CREA reported that the end-of-month supply of homes for sale hit an all-time low in December 2021.5 When supply is that low, prices tend to rise.

Multiple Offers and the Psychology of Fear of Missing Out

Multiple-offer sales were a defining experience for many Ontario buyers in 2021. Homes were often listed, shown for a short period and sold to the strongest offer, and buyers frequently did not know what competing offers were.

Buyers who lost several offers sometimes removed conditions or raised their offers to win. Some offers went above what the property was worth on paper, and appraisals did not always support the purchase price. Buyers who took those risks faced real financial consequences.

The June 1 Stress Test Change

On June 1, 2021, OSFI began requiring a fixed floor for the qualifying rate on uninsured mortgages. Lenders must qualify borrowers at the greater of 5.25% or the contract rate plus 2%. That rule is still on OSFI's current page.21 Our stress test guide explains how it applies today.

Before June 1, 2021, the qualifying rate was based on a benchmark rate rather than a fixed floor.2

The change was meant to make sure borrowers could handle higher rates. Sales and prices still set records through 2021, so the change did not stop the market from running hot.4

Rates: Still Historic, but the Floor Is In

The Bank of Canada held its overnight rate at 0.25% for all of 2021.3 This article does not quote mortgage rates. Mortgage rates change often and vary by lender, product and borrower.

Update, 2026-10-05: On March 2, 2022, the Bank of Canada raised its policy rate by 0.25 percentage points to 0.50%. It was the first increase since before the pandemic.3 The policy rate is a Bank of Canada figure, not a mortgage rate. OAC. Rates subject to change. Conditions apply.

Ontario's Regional Hotspots

Ontario's housing market was not one story in 2021. Results varied by region.

• Greater Toronto Area: TRREB reported 121,712 sales in 2021, up 28%, and a record average price of $1,095,475.6

What This Meant for Real Borrowers

Illustrative example, not a real client. A first-time buyer lost several bidding contests in a row. Each winning offer was above the amount the buyer had planned to pay. After a number of losses, the buyer widened the search to a city farther from the GTA, where the purchase price was lower. The commute was the price of entry.

Buyers in this position often widened their search to other cities. Whether that is a sensible shift in demand or a sign of a strained market depends on your view.

What to Expect in 2022

The points below were written in December 2021, when the Bank of Canada had not yet raised its policy rate from 0.25%. The rate outlook has since changed, as the Rates section above shows.

• Higher rates reduce borrowing capacity. Higher policy rates raise payments on variable-rate mortgages. Fixed rates often move with bond yields. Higher rates also lower the amount a borrower can qualify for.
• Supply remains the binding constraint. Supply was at a record low at the end of 2021. Even with rate increases, low supply may limit price declines.
• Variable-rate borrowers should prepare. If your variable-rate mortgage has an adjustable payment, it can rise when the Bank raises its policy rate. If your payment is fixed, more of each payment goes to interest and less to principal instead. Test your budget at a higher rate before that happens.
• Renewals need planning. Your payment at renewal depends on the rate at that time. Start the conversation before your renewal date.

We tell every client the same thing: buy for the long term, budget for higher rates, and do not make the biggest financial decision of your life in a panic. The market rewards patience and preparation.