High mortgage rates lead to delayed home purchases and extended mortgage terms
Existing homeowners with mortgages are just as worried as first-time buyers about the current economic conditions, according to a new CIBC poll.
The survey revealed that 76% of respondents who are considering buying soon are delaying their plans due to higher mortgage costs. Additionally, nearly three-quarters of current homeowners reported that rising costs have adversely affected their ability to make mortgage payments.
Carissa Lucreziano, vice president of financial and investment advice at CIBC, discussed the widespread anxiety among mortgage holders in the survey results.
“It is certainly a challenging time,” Lucreziano told The Globe and Mail. “Canadians are feeling anxious when it comes to their mortgages, whether it’s making their current payments or facing renewal at higher rates.”
Variable-rate mortgage holders, whose payments are immediately affected when interest rates rise, have likely felt the most stress from the rate hikes, Lucreziano noted.
The CIBC poll also suggests that a significant portion of fixed-rate mortgage holders may not fully comprehend the impact of paying higher interest rates, with about 50% of respondents in this group stating they do not think an increase will substantially affect their finances.
"Some might be underestimating the impact an increase will have on their budget," Lucreziano said, "while others may be anticipating a rate cut before their mortgage renews."
The Bank of Canada's recent rate cut to 4.75% has brought mixed feelings, with Lucreziano acknowledging that there is no certainty of more cuts this year or next.
To ease their payment pain, the survey found that Canadian mortgage holders are considering various options, including making a lump sum payment (21%), seeking to extend the amortization period (10%), or opting for a shorter mortgage term and paying at a higher rate.
Read more: Don't rush your mortgage renewal, experts say
Lucreziano stressed the importance of early planning and budgeting, whether for fixed or variable rate mortgage holders or first-time buyers.
“Typically, it’s best to get started [with planning] about six to eight months before your mortgage renews,” she said.
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