Mortgage renewal will not be a good time for Canada's borrowers…
Variable-rate mortgage holders who have recently purchased their homes will be especially burdened by the prevailing rate-hike environment, according to Bank of Canada senior deputy governor Carolyn Rogers.
“Borrowers with a variable-rate mortgage will already have seen a significant increase in their monthly payments if their payments are also variable,” Rogers said in her prepared remarks for the Young Canadians in Finance group.
Even homeowners who hold fixed-rate mortgages might not remain unscathed by higher payments come renewal time, “depending on when they took out their mortgage and whether they have room to extend their amortization period,” Rogers said.
“The bottom line is that mortgage costs for some Canadians have already increased, and they will likely increase for others in time, making homeownership more expensive.”
Rogers acknowledged the delicate interplay between ensuring affordability in the short-term and in the long run.
“We need to lower house prices to restore balance to Canada’s housing market and make home ownership more affordable for more Canadians,” Rogers said. “But lower house prices may add stress for those people who purchased recently. They will have reduced equity, and this may limit their options to refinance.”
Still, Rogers expressed a belief that Canadian consumers will be able to power through this crisis era, rate hikes notwithstanding.
“We are not expecting a severe economic downturn with the kind of large job losses typical of past recessions,” Rogers assured. “We don’t want this transition to be more difficult than it has to be. But higher interest rates in the short term will bring inflation down in the long term. Canadians are looking for ways to protect themselves from rising prices, and we are working to protect them from entrenched inflation.”