Higher rates are also slamming the brakes on Canada’s once red-hot housing market and, as consumers feel the pinch, could slow spending on travel, dining out and luxury goods.
“There’s going to be a lot of pain out there. And I think the bank is underestimating the risks to both housing and consumption,” said Stephen Brown, senior Canada economist at Capital Economics.Article contentThe moves have sentspiralling, a concern for Canadians with variable rate mortgages, which accounted for about 50 per cent of new mortgage loans in Canada in May, compared with about seven per cent pre-pandemic, official data shows.
We now find ourselves in a situation where the value of our houses might be going down and the mortgages are going upMost Canadians with variable mortgages have static payments: as rates go up the monthly instalment stays the same but less principle gets paid. But about 20 per cent of variable loans are not static — meaning each hike can add hundreds of dollars to a payment.Article content
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