2023-05-16 23:30:00
Inflation isn’t what it used to be, but there’s one place where it still explodes: the cost of the mortgage. Those who are due to renew their interest rate soon will be the next to find out.
• Read also: How to Get the Best Rate on a Mortgage
• Read also: Mortgages: thousands of people on the brink
The jump in the cost of mortgage interest was 28.5% in one year, in April, indicates Statistics Canada, while inflation reached 4.4%.
“Whoever falls in renewal, it may be that he pays even more than that”, drops John Fucale regarding the 28.5%.
Vice-president in charge of mortgage brokers for the M3 Group, owner of Multi-Prêts Hypothèques, his job is to put financial institutions in competition in order to get the best rate for his clients.
He notes that fixed rates have never been so popular, especially those with short terms of 2 or 3 years.
“People are waiting for rate cuts following the eight hikes in the last year,” he observes.
We notice the same thing at Ratehub, a site that allows you to search and compare mortgage interest rates, among other things.
Requests for a variable rate over 5 years only account for 5% of all requests this year, once morest 26% last year.
“Consumers have returned to fixed rates. In 2023, 95% of rate requests sent to Ratehub.ca are for fixed rates,” said Ratehub mortgage director in Quebec, Philippe Simard.
And the 13the monthly payment per year
Fixed rates currently fluctuate between 4.49% and 5.34%, assures John Fucale. It is between 5% and 6% for variable rates.
For example, one of the best 5-year fixed rates (25-year amortization) a broker can find is 4.54%.
The difference is roughly the equivalent of a 13e payment per year, as the average customer signed up in 2018 for a 5-year fixed rate at 3.59%.
This same average customer has a mortgage debt of $313,000. From 2018 to 2023, his monthly payments at 3.59% interest were $1577 while they will now be, at 4.54%, $1740, a difference of $163 per month or $1959 per year .
Inflation picks up once more
The situation will last at least until the end of 2023, when Desjardins estimates that a first reduction in the key rate might take place.
Meanwhile, “we are not out of the woods,” illustrates the institution’s chief economist, Marc Desormeaux.
The reacceleration of inflation, which rose from 4.3% in March to 4.4% in April, might encourage the Bank of Canada to wait longer before lowering rates.
“For those who have to renew over the next few months, interest rates will be very high,” summarizes the economist.
1684286794
#Inflation #cost #mortgage #jumped #year