Why this town is ground zero of Canada’s rising mortgage crisis
Turning down a yet-to-be-paved road, local councillor Colin Best steers past a row of townhouses, some still covered in plastic construction wrap, others nearby with big blue ribbons on the doors welcoming owners, as dump trucks amble along ahead.
Nine months ago, this was a corn field," he says. You go through a neighbourhood like this, one week there's nobody here, the week after it's just full of people."
It's nascent subdivisions like this - with streets so new that one is even named after the current mayor - where you're getting a lot of highly mortgaged people," Best said. All in the first few years of ownership.
Welcome to Milton, a hive of development activity that's also arguably ground zero of Canada's mortgage crisis. The town has the most mortgage holders - 79 per cent of owner households - in the country, according to Statscan numbers recently crunched by Andy Yan, the director of the city program at Simon Fraser University. (In Toronto it's 57 per cent, and nationally, 60 per cent.)
As interest rates have surged over the past year, with eight central bank rate hikes driving up mortgage costs and in many cases adding hundreds or even thousands of dollars to monthly bills, it's already having a noticeable impact here in Milton - from a spike in food bank usage to investors off-loading properties to panic over approaching renewals.
The recession's not here, but there's a lot of people on the edge," Best said.
The Halton Hills community, which sits on the outskirts of the GTA, has seen an explosion of growth in recent years. Much of it has been in the form of semis, townhomes and even condos, edging away from the suburban stereotype of the sprawling single family home. An older downtown, which ironically was the site of filming for the recent film The Man from Toronto," gives way to developments from the early 2000s, and the town is expanding with several new subdivisions to the south.
These newer builds, which attract a lot of young families and new Canadians, are one reason why Katherine Barnett, a broker at RE/MAX realty specialists Inc. and a Milton realtor, believes the town is so heavily mortgaged.
They could afford so much because their money was almost free," she said, referring to the historic low borrowing costs that fed the GTA housing frenzy of the past decade.
The average household income here is $138,800 a year, with an average home price of $1.06 million in February 2023, according to the Toronto Regional Real Estate Board - down 24 per cent from last year.
Barnett describes the town as an expansive suburb of new builds that just keeps on going," and said it makes sense that both groups are interested in newer homes. It's a very young community, with an average age of just 35, according to Statscan, and over 50,000 immigrants in 2021.
The total population from the Census that year was almost 125,000, a 22 per cent jump from 2016. But Best said the town estimates the population is closer to 140,000 due to about 5,000 residents arriving and 1,500 babies born each year.
The young population means local schools are bursting at the seams with an army of portables," he said. But it also means that the population is vulnerable to increases in housing costs, like rising mortgage payments. Young first-time home buyers tend to have more debt and less equity in their homes.
Younger people with huge debt want a new home because it's much safer," added Barnett. They're up to their eyeballs, car payments and all of it, so a new home is safe, you know for probably 10 years you're not going to have to replace anything."
But what might have seemed safe in recent years is fast becoming a burden. Local mortgage agent Agnes Mocko, said she's definitely seeing a lot of people struggling to keep up with their mortgage payments" especially those with variable rates, after eight rate hikes.
These types of mortgages were super popular," at the beginning of the pandemic into the start of 2022, she said, as rates were lower, and they allowed people to qualify for more. A variable rate could have been as low as 1.5 per cent in January 2021 for example, and can now be higher than five per cent.
According to the Bank of Canada variable mortgages now make up one-third of total outstanding mortgage debt nationally, up from about 20 per cent at the end of 2019.
A lot of these people are struggling now because they couldn't really afford it to begin with," Mocko said.
Mocko is slowly starting to see people get into sticky situations," including those with a variable mortgage, as well as people who might have locked into a low fixed rate in 2018/19 and are facing renewal this year or next.
Robin Read Griffin, who bought her freehold townhouse in the oldest of the new Milton," in the early aughts, is already thinking about her renewal, even though it's not coming up until 2025.
I was panicking because I thought it was actually due for renewal this year," said the 50-year-old entrepreneur, who co-owns a boutique marketing company, and locked in a two per cent rate for five years.
The concern comes into play when it's up for renewal and if things are not back on track."
As a single parent, things are already tough enough.
The cost of gas has gone up, hydro has gone up, food has gone up, everything seems to have gone up, with the exception of incomes."
When Read Griffin bought her then brand new home in 2000 with her now late husband, there was still farmland across the street. They came from Mississauga and were attracted to the affordability, as well as the low property taxes. The couple also just loved the area - close enough to the big city and the airport; but closer to the beauty of the Niagara Escarpment."
The town has changed drastically" since then.
She's proud of the fact that Milton is a town, not a city, and still has a community feel. But it's not as affordable as when she arrived. She recently had younger relatives hoping to buy who just couldn't financially. Now I stay because real estate prices have soared since then and it does not make sense to move," she said.
Simon Fraser's Yan said his data, on municipalities with over 100,000 people, could be used as an indicator of vulnerability to increasing interest rates."
In general, factors like demographic shifts might be at play. It's also interesting to note, he said, that in and around both Toronto and Vancouver, the number of homeowners who are still paying off their homes increases really the farther away you go from the central city."
This reflects the phantom affordability" of looking for cheaper housing through sprawl, which sometimes doesn't actually work out once the cost of owning a car, a necessity in many of these communities, is factored in.
It's true that home prices are still steep in Milton, but it seems that the missing middle" or gentle density has finally arrived in the suburbs with some of the denser new builds.
Unfortunately it's still car dependent," noted Best, who is also the president of the Association of Municipalities of Ontario, and has lived in Milton all his life.
Construction cranes are popping up, it's like War of the Worlds here," he said, a reference to the towering, industrial aliens from the 2005 Steven Spielberg adaptation of the classic science fiction novel.
In fact, he said, there are currently eight cranes in town (historically they've had zero). Best jokes that Milton's symbol should be a dump truck, because that's all you see in town."
However even with all this growth, Best estimates about a dozen recent developments have been delayed, scaled back, or reduced as builders also grapple with rising interest rates, as well as labour shortages and higher construction costs.
The interest rates are killing them, it's not only the home buyers, it's the builders that are affected," he said.
The new neighbourhoods are still flanked by fields, with a fleeting view, at times, of Mount Nemo and the Escarpment, and the odd historic farmhouse that's been relocated into a development, standing side-by-side with brand new homes.
Astronaut Hadfield's family farm, which he shouted out from space, along with the local elementary school named after him, is still there in one of those fields.
Closer to the Go Station, where new planned condos are clustered, Best passes a mall, noting that it's dead" and slated for redevelopment once the store leases are up. But he adds that the premium outlet mall is still packed.
You've got extremes," he added. Some people are just barely making it through, and other people, they've got loads of cash."
It's something Irshad Ahmad, Executive Director of the Milton Halal Food Bank, is keenly aware of. He said they've seen a huge increase in demand for their services since summer 2022. They're also getting people coming in reporting that rising rents and mortgage payments are crippling them.
It's a peak which we never have seen before, and could not even imagine," he said. Demand was stable" during the height of the pandemic, but rising interest rates, along with higher food prices and inflation have created a perfect storm.
People pay their mortgages or the rent, or they bring the groceries," he said. They can't do both."
On the other end of the spectrum, Chuck and Melissa Charlton, a husband-and-wife realtor team in Milton that sell a lot of new builds, said they're starting to see investors off-loading their properties.
Many of them favoured variable rates because they were lower and more flexible. Now their payments have gone up by hundreds of dollars a month, and that's often the final straw," said Chuck. As for individuals, Melissa said they're definitely feeling the squeeze," but they're not yet at the point of having to sell.
I think most people are of the opinion that this is a temporary blip, that the interest rates are almost like a storm that's passing through and eventually it's going to settle down," Chuck said.
But at the same time, it's like the water is right up to their eyeballs right now, how long can you hang in that position for?"
May Warren is a Toronto-based housing reporter for the Star. Follow her on Twitter: @maywarren11