Amid a financial maelstrom, Canadians are dealing with the repercussions of a dramatic series of interest rate hikes. Since March of the previous year, the Bank of Canada has increased rates nine times, catapulting them to a zenith not seen in two decades. This has left numerous mortgage holders in a tight spot, struggling to keep up with escalating monthly payments.
Royal LePage’s extensive survey sheds light on the mood of the nation during these trying times. It reveals that 74% of mortgage holders who are due for renewal within the next 18 months are apprehensive about the prospect of higher rates.
In the face of these financial headwinds, many are considering changes to their mortgage plans, like switching mortgage types or prolonging their amortization schedules, to alleviate some of the monetary pressure.
In a much-needed breather, the Bank of Canada has opted to hold the overnight rate at 5 percent, offering a momentary reprieve from the relentless rate hikes.
Key insights from the Royal LePage study highlight that about 3.4 million Canadian mortgage holders are approaching their renewal period by March 2025, with more than half due in the upcoming year. Out of these, the majority have committed to fixed-rate mortgages, while a smaller portion has variable rates.
Among those with variable or hybrid mortgages who are nearing their renewal and are unsettled by the instability, 40 percent are considering transitioning to a fixed-rate mortgage to gain some predictability in their financial commitments.
Karen Yolevski, COO of Royal LePage Real Estate Services, points out the cautious nature of Canadians when it comes to financial decisions. This caution is reflected in their mortgage choices, with many opting for the security of fixed rates. She notes that the financial system is robust and ready to assist consumers with their significant investment—home ownership.
A striking 64 percent of those with variable or hybrid mortgages have hit their trigger rates due to the continued rate hikes, which has led to increased monthly payments and added financial burden.
Yolevski elaborates that Canadians with variable-rate mortgages are feeling the squeeze, with some seeing their payments double or triple because of the central bank’s rate increases aimed at controlling inflation. While those with fixed-rate mortgages have been shielded temporarily, she foresees that upon renewal, they will need to confront the reality of higher payments, as a return to sub-one-percent rates is improbable.
The survey underscores the significant economic pressure on households with variable or hybrid mortgages—86 percent report feeling the financial strain of higher rates. Many are tightening their belts and tapping into savings to weather the storm.
In essence, the Bank of Canada’s rigorous stance on interest rates has sent ripples through the mortgage landscape, leaving many pondering over their financial future. With historically low rates out of the picture, Canadians are left to find new strategies to maintain their fiscal health in this challenging environment.
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