A large share of Canadian mortgage holders say that their situations would need to change significantly if the central bank raises rates in the near future
Nearly one in 10 Canadians said that they would be forced to sell their homes if the Bank of Canada decides to raise its benchmark interest rate once more, according to a survey by WealthRocket.
The poll found that fully 35% of Canadian mortgage holders believe that they would have to change some aspects of their current situation if the central bank hikes rates either this week or in 2024.
Approximately 17% said that they would need to get additional jobs to continue servicing their mortgage payments, while 16% said that they would have to extend their amortizations so that they can manage their expenses.
The survey further found that nearly one in three Canadian mortgage holders are exceeding the CMHC’s (Canada Mortgage and Housing Corporation’s) recommended gross debt service ratio of 39%.
These respondents said that due to rising costs, they are compelled to spend 40% or more of their monthly incomes on housing.
By age, those in the 18-to-34-year range were found to be more likely (37%) to exceed the CMHC’s recommended GDS than those age 35 to 54 (30%) and 55+ (26%).
“Because they’re younger, their incomes are typically lower, they’ve had less time to save, and likely made a smaller down payment,” said David O’Leary, personal finance expert at WealthRocket. “They’ve also had their mortgage for a shorter period and have had less time to pay it down. It’s no surprise that their housing costs eat up a greater percentage of their income.”
The Bank of Canada's recent decision to hold rates doesn't signal an end to potential rate hikes, warns James Laird, co-CEO of Ratehub and president of CanWise.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 11, 2023
Full article: https://t.co/Tt2uOIZbHq#mortgageindustry #ratehikes #interestrates #mortgagebroker
Rentals supplement some Canadians’ incomes
An estimated 4% of Canadian home owners have been forced to rent out the entirety or a portion of the homes to cover housing costs, including mortgages.
And 3% said that they need to take on more credit to service housing expenses aside their mortgages.
“Ideally you don’t want to be doing that if you can avoid it,” says O’Leary. “It can be reasonable to the extent that it’s a very short-term solution where you have a clear line of sight on when you’ll receive the income to pay it back.”
