Homeowners in Toronto and Vancouver facing pending mortgage renewals could find themselves paying hundreds of dollars more a month and need to consider ways to prepare for the coming hit, from proactively hiking payments now to paying down other forms of debt to minimize their exposure to rising interest rates.
The picture is a bit better for people with expiring five-year mortgages renewing today under the same parameters, with the average buyer paying $676 more a month based on average GTA prices five years ago, and $562 more a month in Vancouver. Real estate agents have pointed out that many buyers were already stretching themselves to the limits just to be able to own property, and any additional strain could be consequential.
Mr. Parubets said many of his clients who have renewals coming up in the next year or two haven’t paid much attention to the looming financial hit and are instead preoccupied by the immediate impact that rising interest rates have had on their home equity and other lines of credit payments. Financial planners such as Mr. Parubets believe the rapid change in interest rates could spell the end of the pandemic-era shift in savings, where Canadian households cumulatively amassed billions during a period of low spending during lockdowns. It’s not just homeowners facing pressure at this time – those who rent in cities such as Vancouver and Toronto are also dealing with inflated monthly payments.
“You’ve got a lot more people saying ‘I kind of like the guaranteed return of paying of my 5 or 6 per cent interest rate debt,’ especially if they’re nervous about the stock market and further interest rate increases.”