British Columbia mortgage holders have serious concerns about the effects of rising interest rates on their financial wellbeing, according to a new poll from the Angus Reid Institute.
The Bank of Canada held its key interest rate steady at 4.5 per cent in April, but has five more opportunities to potentially hike it this year.
The central bank has already raised rates eight times since the start of 2022, which has driven mortgage lending rates correspondingly higher.
According to the survey, 76 per cent of British Columbians with a mortgage said they were worried their next renewal could cost them more, with 35 per cent saying they were worried it would cost “significantly more.” Fourteen per cent said they would lose money if forced to sell the property now.
“When you look at who is struggling the most, it’s the people who are least poised to absorb those interest rate increases who are dealing with the most significant interest rate increases because they’ve been relying on variable rate mortgages and they’re likely to have more years left on amortization,” Angus Reid Institute president Shachi Kurl told Global News.
“If you’re somebody who got into a 30-year mortgage on a variable rate that first year of the pandemic, when money was still extremely cheap and we saw a dip in housing prices, this is a very scary time.”
The poll found that a full quarter of B.C. mortgage holders had variable rate mortgages. Thirty-two per cent also said they still had 20 years or more left on the term of their mortgage.
Kurl said there is no sign of interest rates falling to their recent historical lows in the near future, meaning those who had banked on low payments over the full term of their mortgage could be in for a “rough time.”
Spyros Koulyras, managing director with DLC Onward Lending Group, said the poll’s results wouldn’t shock most British Columbians already holding a mortgage.
“It’s not surprising — interest rates have effectively more than tripled, so it’s obviously had an impact on people’s finances and their cash outflows,” he said.
Koulyras said people who currently hold variable rate mortgages could potentially be looking at an “exponential” increase in their payments, while those with renewals coming up are also facing a hit to their monthly expenses.
While that may leave people anxious, he said there are many creative ways to bring monthly payments down with professional help. He recommended homeowners get in touch with a mortgage professional at least six months before their renewal comes up to talk options.
“Ultimately we look at strategies to potentially decrease the amount of the increase to their payment,” he said.
“That could include re-amortizing their mortgage, freeing up some equity to provide a buffer, as well as looking at their overall cash outlays monthly and potentially incorporating some other debts into their mortgage.”
The Angus Reid Institute conducted an online survey from March 30-31, 2023, among a representative randomized sample of 1,600 Canadian adults who are members of Angus Reid Forum. For comparison purposes only, a probability sample of this size would carry a margin of error of +/- 2 percentage points, 19 times out of 20.
Comments