Stickier-than-anticipated inflation is taking its toll
Approximately 62% of Canadian homeowners have expressed concerns surrounding higher mortgage payments come renewal time, representing an increase of 9% from October 2022, according to a recent Leger survey commissioned by RATESDOTCA and BNN Bloomberg.
Another 31% said that they were “very concerned” about these higher renewal payments, up by 19% from October 2022. More than one in five (21%) of Canadians admitted that they do not have plans in place to absorb the likely increases in mortgage payments.
The anxiety was especially pronounced among younger homeowners, with 73% of those in the 18-34 age range reporting concern about higher mortgage payments on renewal. This represented an increase of 10% from October 2022.
RATESDOTCA attributed the jumps to stickier than anticipated inflation.
“It looks like we won’t see significant rate decreases for some time,” said John Shmuel, managing editor at RATESDOTCA. “Homeowners will likely face mortgage rate increases at renewal that could severely tighten household budgets that are already stretched thin by months of inflationary price increases.”
Concerns arise about upcoming mortgage renewals, with significant fixed-rate terms ending. Some borrowers may face challenges, with up to 15% of Desjardins borrowers under stress. https://t.co/TnmRj1QbdL#mortgagenews #mortgageindustry #mortgagerepayment #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 28, 2023
How are Canadians planning to manage their finances?
Among the 56% of respondents that reported having a plan in place to absorb higher payments, 39% said that they will be decreasing spending in other areas, while 9% plan to dip into their savings, 5% plan to take out a loan, and 3% plan to sell their homes.
“This additional expense means that a car down payment, a few grocery runs, or vacation must now be redirected towards mortgage payments,” said Victor Tran, mortgage expert at RATESDOTCA. “Otherwise, people would have to dip into their savings to cover this amount or find other ways to pay it off.”
