With the recent BoC rate hike, mortgage holders are keeping an eye on the market.
“If you committed two or three years ago, you’re still in good shape,” said Steve Dino, vice president of credit risk at WFCU Credit Union.
He said people who bought their homes with a lower variable-rate mortgage instead of a fixed rate are feeling financially challenged.
“And for some people, unfortunately, you might fall into negative extinction, which means you don’t push any of your principles. You are actually increasing your principle,” Dino said.
Someone with an upcoming mortgage renewal could pay 30 to 40 percent more, Dino added, “consumers are going to have to make some choices they wouldn’t have made in the past.”
At the height of the housing bubble in late 2021 and early 2022, people were buying at inflated prices and rock bottom prices. Now, home buyers are buying at a lower price and a higher rate.
“When you look at the debt service and interest cost, in many cases, it has to be prohibitive,” said Mark Lalovic, president of the Windsor-Essex County Association of Realtors. “Although interest rates have gone up, the cost of buying a property has come down dramatically.”
With low rates, people were taking out variable rate mortgages, but now they’re signing up for short term mortgages to see where the market has landed.
“Adjustable rate mortgages, due to the actions of the Bank of Canada, have accelerated at an unprecedented rate,” Dino said.
He also noted at the other end of the spectrum, where many spread their payments over 30 years instead of the typical 25, “You’ll address the affordability issue on a monthly basis, but you’ll pay more in the long run.”
People need a roof over their heads, and Lalovich feels people will adapt: ”We think we’ll see people bargain where there are financial constraints, but take care of their housing needs and downsize in other areas.”
A new report from Royal LePage finds that demand for housing remains strong, but advises governments to step up affordable housing creation to balance the supply and demand that continues to plague the country.
“We are still in huge shortages and it will be a mainstay of the market,” Lalovic said.
2023-07-15 05:32:40
#Homeowners #Face #Rising #Mortgages
