If you have a fixed mortgage, Epic Real Estate president Shane Styles says you need to stop panicking about rising interest rates because it has nothing to do with you.
“I deal with mortgage professionals all the time…and I heard this from three separate mortgage brokers last week, and they all said, ‘I get all these phone calls from mortgage holders fixed rate mortgages. worried about their interest rate,” Styles said.
Homeowners with fixed-rate mortgages won’t be affected by the rate increase, he says.
For potential young homeowners freaking out that rates are too high, Styles says you should look at where they were 20 or more years ago.
“In 1975, the interest rate was 11.75%. 1985, it was 11.5%. 2006 it was 6.95%,” he said.
He points out that these rates are significantly higher than the 2.5% they jumped to on July 13.
“They see the headlines, and that’s part of the challenge. But they don’t have the time or they don’t do their due diligence to really understand what it means to them,” Styles said.
So who will be affected in the Okanagan?
Styles says the people who will feel that rate increase the most are those trying to become homeowners for the first time right now.
“Usually they put together whatever they can for a down payment and make sure they’re in a solid job,” Styles said.
He says the all-point increase was no shock to those in his industry, but it could be for someone who is already struggling to pay their mortgage.
“A $300,000 mortgage – just to pull a number – on Tuesday, what would that cost them in one payment a month? Because in the end, the rate means nothing.
“It’s really about what the payment is each month… I look at it on a monthly basis, what I can afford each month. So you take this $300,000 mortgage on Tuesday, it was $1,343 a month. On Wednesday, it rose to $1,450 per month.
Styles says if the extra $107 a month is causing you stress, you probably shouldn’t have taken out a mortgage in the first place.
In the long run, Styles says people will have to rethink their spending habits because a night of dinner and drinks for two can easily offset the extra cost.
Kelowna mortgage broker Allison Swanson says the same thing. “I think there’s a difference between ability, like can you afford these mortgages, and comfort,” she said.
Swanson says it comes down to priorities and what people really want.
She agrees that those most affected by the rate increase will be first-time buyers, especially those shopping at the peak of their budget.
“Their borrowing qualification is going to be reduced because the Bank of Canada requires us to qualify you at 5.25% or the contract rate plus 2%, whichever is greater,” Swanson explained.
“So right now that 5.25% is kind of out of date and we’re looking at contract rates plus 2%. So people qualify 6.5-8% and it cuts into their budget. »
Swanson also acknowledges that those with fixed-rate mortgages up for renewal will also be affected.
“When you renew your mortgage, the current leger you have is just going to afford you a renewal rate. You can choose to take that rate, but I always recommend talking to a mortgage broker,” Swanson said.
“By the way, you can review your mortgage at any time, not necessarily just on the renewal date. So if your interest rate has gone up a few percent, yes your payment is absolutely going to go up, but keep in mind that over that five year term, let’s say on average it’s five years you have paid off a significant portion of your principal, so your payment will not increase as much as you think. »
Swanson recommends reviewing your mortgage every year and speaking with the experts to learn about all of your options.
@thebrittwebster
[email protected]
Like us on Facebook and follow us on Twitter and subscribe to our daily and subscribe to our daily newsletter.
–
