With many Canadian homeowners facing a sharp increase in mortgage payments, many have decided to relieve their mortgages in exchange for paying a bail, leading to the largest number of residential units sold in Toronto in over a decade, indicating a significant price drop in the coming months.

Data showed that in Toronto, the city where two-thirds of the residential units in the country are sold, which is considered a leader in other major urban areas, inventories have exceeded the heights reached 10 years ago. At the same time, sales have lagged.

Real estate advisors said that the high supply of residential units with weak sales shows a high degree of pressure in Canada’s largest real estate market, indicating either a wave of defaults or a price correction in the near future.

The rise in available properties is feeding homeowners and investors who bought homes and apartments five years ago at historically low mortgage rates, aiming to capture a share of Toronto's lucrative rental market.

But these mortgages are now coming up for renewal in a completely different interest rate environment than they were five years ago, and mortgage rates have risen sharply, although the Bank of Canada recently began guiding them downward.

In Canada, mortgages are typically for 25 years and are renewed every three or five years, unlike the United States, where homeowners can enjoy a fixed rate for the life of the mortgage for either 15 or 30 years.

Under current rates, mortgage payments for many homeowners will double, according to calculations from ratehub.ca, a site that compares mortgage offers.

Next year, nearly CAD 300 billion (USD 219.33 billion) in mortgages in chartered banks will be renewed.

Karl Gomez, chief economist at CoStar Group, a U.S.-based real estate information provider, said, “Some of them are investors who just want to get away from their units now because they can't afford them.”

At the same time, many are hesitant to lower asking prices and book losses on their investments, he said, at least for now.

Daniel Fusch, director of economic research at RARE Real Estate, said, “There is limited willingness to lose money.” He added, “It seems that no one has really adjusted their expectations to a market where they won’t make a profit.”

John Lusink, president of Right at Home Realty, Canada’s largest independent residential brokerage, said this trend is particularly evident in the condominium market, where inventory has reached a historic high.

It typically takes more than five months to sell the current inventory.