Lexicon Financial Group Weekly Update — September 24, 2025
“The ache for home lives in all of us.”
From the desk of Craig Swistun, CIM, MFA-P, Portfolio Manager, Raymond James Investment Counsel, and Wayne Hendry, Client Relationship Manager, Raymond James Investment Counsel
ISSUE 197
Looking Around
The ongoing housing shortage and rising rents are making it difficult for Canadians, especially young Canadians, to buy or rent a home of their own. On average, people aged 25 to 34 in Canada earn about 25 per cent less than those just a decade older than them (35 to 44). But they are paying the same high rents. The average asking rents for a one-bedroom apartment have hit $2,380 in Vancouver and $2,170 in Toronto. For a young person (aged 25 to 34) earning a median income in Vancouver — about $3,900 before tax per month, nearly 60 per cent of their paycheque goes straight to rent. This is troubling, since many economists have suggested that people shouldn’t spend more than 30 per cent of their income on lodging. What’s left has to go toward living basics — $700 for groceries and dine-outs, $300 for phone, internet and utilities, and $100 for transportation.
That doesn’t leave much for entertainment, leisure, or savings.
This situation gets a little better if young people are willing to split a two-bedroom with a partner or roommate. But even then, renter households are still spending nearly half of their pre-tax income on rent alone in these cities. (1)
On top of this, the Canada Mortgage and Housing Corporation (CMHC) recently stated that the current major housing affordability challenge in Canada is making housing less affordable – affordable housing is defined as costing less than 30 per cent of pre-tax household income – for many. It estimates that by 2035, Canada will need to build between 430,000 and 480,000 homes just to get affordability back to 2019 levels.
This situation is made more complex by significant regional variations and emerging trends across Canada. In the first half of 2025, combined housing starts in Canada’s seven major census metropolitan areas (CMAs) has held steady but this masks sharp regional differences. Although there were gains in Calgary, Edmonton, Montréal and Ottawa, they were offset by declines in Toronto, Vancouver and Halifax. Ground-oriented construction – single-detached, semi-detached and row homes – saw modest growth, driven by lower mortgage rates. In higher-cost centres, affordability remained strained and homebuyers cautious amid economic uncertainty.
Meanwhile, purpose-built rental starts surged, boosted by government support and a shift among developers toward the rental market. It is expected that, in the context of trade tensions, economic uncertainty and slower population growth, combined starts across the seven major CMAs will only recover gradually, leading to a modest improvement by 2027. (2)
Owning a home has historically been a powerful wealth generator, contributing substantially to a family's overall net worth. In fact, in 2021, more than a fifth (22.9 per cent) of Canada’s total national wealth was directly connected to the residential housing market. The value of Canada's net stock of residential housing in 2021 was estimated to be over $3.4 trillion. For the 10 million Canadian households who owned their home in 2021, it was, more often than not, their most precious asset. (3)
One of the problems with being “asset rich” is that it may be difficult to convert those assets into cash when you need it most. There are, however, strategies that are available to home owners that are not available to renters.
Home equity line of credit (HELOC) – The home owner can borrow as needed up to their credit limit and pay interest only on the balance borrowed. HELOCs generally can be up to 65 per cent of a home’s value, but a combined mortgage and HELOC balance cannot exceed 80 per cent of the appraised home value.The HELOC is a secured loan as it uses the home as collateral. Usually, secured loans typically have lower interest rates than unsecured loans (such as personal loans and credit card debt). The lender will evaluate the applicant’s borrowing capacity based on their income. Incomes tend to be lower in retirement, so the credit approval for retirees will be lower. HELOC limits can be lowered when home values fall as there is less equity for collateral. An unused HELOC can be also be closed by the lender to reduce liability for a product that is not generating profit.
From a risk perspective, those considering a HELOC will want to be confident that they are able to make the regular interest payments, pay down the principal in a reasonable amount of time, and understand that their loan is directly connected to their property.
Reverse mortgage – A reverse mortgage allows a home owner aged 55 or older to borrow up to 55 per cent of their home’s value. There are no income or repayment requirements during the borrower’s lifetime, unless the home is sold. Upon the death of the home owner, or the second to die for a couple, the reverse mortgage has to be paid off from the home sale proceeds. Reverse mortgages can be a double-edged sword, as interest rates tend to be a bit higher than with conventional borrowing. However, if there are no other borrowing options, a reverse mortgage at least provides an alternative to selling the home and having to downsize.
Selling your home – Selling a home frees up cash to invest and use for future spending. However, home owners in Canada will incur transaction costs (ranging from real estate commissions to legal fees to moving costs to land transfer tax) when selling their home. As a result, conventional advice is to minimize the amount of times you downsize, to save on these fees and taxes. Downsizing to a home valued 25 to 50 per cent less might be a better way to go. (4)
Saving for a home is difficult, but there are programs available to make this easier for younger people. An FHSA (First Home Savings Account) is a registered Canadian plan that helps first-time homebuyers save for a down payment. It allows for tax-deductible contributions, tax-free investment growth, and tax-free withdrawals to buy or build a qualifying first home. Canadians with RSP investments can also use a portion of their assets to purchase a home.
However, if you are already a homeowner and are curious to explore the options presented above, give us a quick call. We have relationships with real estate agents and mortgage brokers that can help guide you through your options.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
Oxford says Canadian economy to remain sluggish as housing struggles to find bottom
Fed Chair Powell says rising inflation and slow hiring pose 'challenging situation'
After Years of Stagnant Growth, Hope Emerges for EU Economy
Video: A Year Since Stimulus, Has China’s Economy Changed Much?
Looking Back
The S&P/TSX composite index (TSX), Canada’s main stock index, rose to another record high on Friday as gold mining shares climbed and investors cheered this week’s rate cuts by the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed). For the week, the TSX was up 1.7 per cent – its seventh straight weekly gain and the longest such streak since February 2024. According to many, the BoC rate cut should support the TSX, as it clearly signalled confidence in the market. This has repriced risk for investors and provided a clear tailwind for Canadian equities. Although Canadian retail sales fell 0.8 per cent in July, an advanced indicator pointed to these rebounding by one per cent in August. The materials sector (which includes fertilizer companies and metal mining shares) rose 3.9 per cent, as the price of gold moved closer to another record high. The TSX consumer staples sector gained 1.3 per cent, while heavily weighted financials were up 0.9 per cent. Only two of 10 major TSX sectors ended lower, with energy being one of them as the price of oil settled 1.4 per cent lower at US$62.68 a barrel due to worries about large supplies and declining demand. (5)
Stock indexes in the U.S. rose to record highs last week due to the Fed lowering short-term interest rates for the first time in nine months. Small-cap stocks—which can be more sensitive to interest rate movements than larger companies—rallied, with the Russell 2000 Index gaining 2.16 per cent. By the end of last week, the Nasdaq Composite had advanced 2.21 per cent for the week, the S&P 500 Index rose 1.22 per cent while the Dow Jones Industrial Average was up 1.05 per cent. Recent weakness in the labour market appeared to be the driver of the Fed’s decision to lower borrowing costs, with policymakers acknowledging that “job gains have slowed” and that “downside risks to employment have risen” in their post-meeting statement. The Fed’s Summary of Economic Projections indicated that most policymakers expect to lower the central bank’s policy rate by an additional 50 basis points by the end of 2025, which is more easing than their last projections made in June. Expectations for rate cuts in 2026 and 2027 have also increased.
The pan-European STOXX Europe 600 Index ended lower last week, as investors assessed a raft of monetary policy decisions. Major stock indexes were mixed. Notably, industrial production in the euro bloc rebounded in July by a seasonally-adjusted 0.3 per cent sequentially, after shrinking 0.6 per cent in June. Increased output of capital, durable, and non-durable goods, despite tariff-related uncertainty, more than offset a contraction in energy production.
The Bank of Japan (BoJ) also surprised investors by announcing plans to begin selling its holdings of exchange-traded funds and Japanese real estate investment trusts much earlier than expected—a move widely seen as a signal toward monetary policy normalization. As anticipated, the BoJ held interest rates steady at 0.50 per cent, in an environment of domestic political and global trade uncertainty. However, for the first time during Governor Kazuo Ueda’s tenure, two policymakers dissented, preferring a rate hike over holding rates steady.
Stock indexes in China declined, as investors pocketed gains after a recent rally and a trio of indicators pointed to an economic slowdown. Although China’s statistics bureau reported that August retail sales rose 3.4 per cent and industrial output gained 5.2 per cent year on year, this the worst monthly performance for both gauges this year. Fixed asset investment growth slowed to 0.5 per cent in the year’s first eight months, the lowest reading for the period on record except for 2020, a pandemic year. These readings all trailed expectations and pointed to a broad slowdown in China’s economy, after it grew a surprisingly strong 5.3 per cent in the year’s first half. This weak data means that the Chinese government will likely roll out additional stimulus measures to hit its official five per cent growth target as deflation continues to stalk the economy. It is widely believed that the government may implement targeted stimulus measures to help bolster the housing market, which has been stagnant for more than four. (6)
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
Why Living Alone is Now a Luxury Most Young Canadians Can’t Afford, Jasmine Ng, Housing Assessment Resource Tools, August 13, 2025
Fall 2025 Housing Supply Report, Canada Mortgage and Housing Corporation, September 9, 2025
National Housing Day: A look at homeowners and renters, Statistics Canada, November 22, 2022
Planning to use your home equity in retirement, Jason Heath, MoneySense June 2, 2025
TSX rallies to another record high close, longest weekly winning streak since early 2024, Reuters/Globe staff, The Globe and Mail, September 19, 2025
Global markets weekly update - Federal Reserve cuts rates for first time this year, T. Rowe Price, September 19, 2025
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Looking to Learn?
If you want to know more about some of the topics we wrote about this week, just click on the links below:
Canada’s housing crisis is preventing millions from forming the households they want
Canadian Housing Starts (August 2025)
Ontario housing construction collapse 'should alarm policymakers,' report warns