Canadians who need to renew their mortgages in the coming years could see their monthly payments “nearly double” while paying half as much, according to an expert.
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The market strategist at the RJ O’Brien firm, Simon Brière, explained Wednesday in an interview on LCN that “the increase in interest rates will affect several things.”
“Today with the renewal, the interest will have almost doubled, even tripled, while the capital repayment is half as much,” he says.
The market research specialist takes the example of a mortgage payment of $1,700 per month before renewal. The latter “could end up at almost $3,000 [avec les nouveaux taux d’intérêt] and the distribution between interest and capital is very different.
In this example, Mr. Brière estimates that if the borrower repaid $1,000 of his debt and paid $700 in interest previously, “with the new conditions, that would be $2,500 in interest and $500 in capital.”
Those who renew their mortgage will therefore find themselves paying “much more, but the mortgage balance does not change[ra] essentially not.”
Young families and the middle class at risk
In Canada, 60% of mortgage loans will have to be renewed over the next three years and the renewal should be done at a much higher rate than the last one that was negotiated with their financial institution.
According to the market strategist, those who will be most affected by these drastic increases in interest rates are those who have just purchased a property and are only at the beginning of their repayment while those who have almost finished to pay their mortgage will escape virtually unscathed.
“It’s double standards,” says Mr. Brière.
“The people most affected will obviously be the middle class and especially young adults, young families,” he maintains. For young families who bought a house in the last five, even ten years, things will start to get much more difficult.”
In addition, those who were victims of the context of bidding wars observed during the pandemic for the purchase of their property could experience “considerable financial stress” since they may today find themselves having paid much more for a house than what they had. that it is really worth.
“What will happen in my opinion, we already see it today in the economy, there are wage demands – whether at the level of the strike or otherwise – to have more wages which will make it possible to pay the ‘mortgage.”
In short, these are ideal conditions for a potential mortgage bomb that is unfolding before Canadians.
2023-11-01 21:13:40
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