Mortgage holders faced with more questions
With a recent hike in the Bank of Canada interest rate, mortgage holders are keeping an eye on the market.
“If you locked in two or three years ago, you're still in a good place,” said Steve Deneau, vice president of Credit Risk at the WFCU Credit Union.
He said people who bought their homes with a low variable rate mortgage instead of a fixed rate are feeling the pinch financially.
“And for some people, unfortunately, you might even fall into negative amortization, which means you're not paying any of your principle off. You're actually adding to your principle,” said Deneau.
Deneau added someone with an upcoming mortgage renewal could be paying 30-40 per cent more, “Consumers are going to have to make some choices they typically wouldn't have made in the past.”
At the height of the real estate bubble in late 2021 and early 2022, people were buying at inflated prices with lower rates. Now, home buyers are purchasing lower with a higher rate.
“When you look at the debt service and the interest cost, in many cases, it should be a wash,” said Mark Lalovich, president of the Windsor-Essex County Association of Realtors. “Even though the interest rates are up, your cost to purchase the property has come down pretty significantly.”
With low rates, people were taking variable mortgages, but now are signing short term to see where the market lands.
“The variable rate mortgages, and because of the bank of Canada's actions have accelerated at a pace that's unprecedented,” Deneau said.
He also pointed to the other end of the spectrum, where many are spreading their payments over 30 years instead of the typical 25, “It will address the issue of affordability on a month-to-month basis but over the long term you're going to pay more.”
People need a roof over their heads and Lalovich feels people will adjust, “We believe we're going to see people compromising where there's financial constraints but they're going to take care of their housing needs and cut back on other areas.”
A new report from Royal LePage has found demand for homes remains strong, but advised governments to step up to create more affordable housing in order to balance supply versus demand that continues to plague the country.
“We still have a major shortage going on and that will be the underpinning of the market,” Lalovich said.
CTVNews.ca Top Stories
![](https://www.ctvnews.ca/polopoly_fs/1.7029443.1725744633!/httpImage/image.png_gen/derivatives/landscape_800/image.png)
Police release video of Toronto plaza shooting that killed university student
A university student from Brampton was killed when two shooters fired indiscriminately into a crowded plaza in Toronto last month in what police say was a 'cowardly act.'
BREAKING Manhunt underway for suspect after several people shot in Kentucky near Interstate 75, officials say
Several people have been shot near Interstate 75 in Laurel County, Kentucky, according to the Laurel County Sheriff’s office.
The iPhone is getting a 'glow' up. What to expect from Apple's Monday event
Apple excited fans with its vision for its 'Apple Intelligence' artificial intelligence system earlier this year. Now, it's time for the company to prove it really works.
No more porta-potties at B.C. construction sites starting Oct. 1
What some B.C. construction workers describe as the worst aspect of their jobs will be coming to an end next month, the province announced.
'Hopeless and helpless': Regina mother seeks help to treat rare spinal disease
Mary Grace Rico is seeking help in getting treatment for a rare spinal condition.
'Extremely vigorous' wildfire activity in central B.C. prompts crews to back off for safety
The wildfire fight in central B.C. intensified Friday, according to officials.
Trump campaigns in Wisconsin just days ahead of debate with Harris
With just days to go before his first — and likely only — debate against U.S. Vice-President Kamala Harris, former U.S. president Donald Trump leaned into his familiar grievances about everything from his indictments to the border as he campaigned in one of the most deeply Republican swaths of battleground Wisconsin.
They were due to leave for their dream cruise in May. Three months on they’re still stuck at the departure port
It was the years-long cruise that was supposed to set sail, but saw its departure postponed… postponed… and postponed again.