Posthaste: Here's how much mortgage pain is coming down the pipe for Canadians
Bank of Canada governor Tiff Macklem told Senators this week that part of the reason the central bank held rates in October was because of the effect the coming wave of mortgage renewals is expected to have on the economy.
“One of the important reasons why we held our policy rate of five per cent is that we know that those renewals are coming. So we know that there’s more to come from what we’ve already done,” Macklem said. “That’s why we have a forecast for weaker growth.”
Over the past 19 months Canadians’ borrowing costs have risen as the Bank hiked its interest rate from 0.25 per cent to 5 per cent.
According to Oxford Economics, mortgage interest payments rose to 5.8 per cent of household disposable income in the second quarter of 2023. While this is lower than the high of 7.2 per cent in 1991, it is the highest since 1996, and well above the 3.8 per cent average from 2013 to 2019.
An estimated 3.4 million Canadians will renegotiate their mortgages over the next 18 months, says real estate brokerage Royal LePage — and almost all will end up paying a higher rate with higher monthly payments.
How much higher? To find out online realtor Zoocasa analyzed mortgage payments on homes bought in 2020 and 2018 to determine what their payments might be if they renew now.
Canadians who bought in 2020 will feel the most pain. One of the best mortgage rates available in September 2020 was 1.64 per cent, Zoocasa said. Renewing now would bump that rate up to 5.24 per cent.
How that translates into dollars depends on where you were buying. In Vancouver, Canada’s most expensive market, someone who bought a home at the average of $955,000 in September 2020 would have made monthly mortgage payments of $3,737 for the past three years.
Read more on financialpost.com
