2023-06-08 05:06:19
The increase in the key rate to 4.75% announced Wednesday by the Bank of Canada is shaking first-time buyers, afflicted by the explosion in their monthly payments for a year.
This is particularly the case of Rosemarie Gariépy. When they bought their condo in March 2022, the teacher and her spouse were convinced they were getting a good deal. Having paid “around $200,000” for this first property in Quebec, the young couple chose a variable rate mortgage repayment, which was then at 1.5%. “Everywhere we called to shop around for our interest rate, they all told us to take a variable rate,” recalls the young woman.
We would have been much better off with a flat rate, but no one saw that coming.
Rosemarie Gariepy
Similar situation for Maude Paquette-Boulva. When she purchased her condominium in Pointe-Saint-Charles in June 2022, the 32-year-old designer also chose a variable interest rate. As a self-employed person, she says she doesn’t have “a lot of issues with risk,” but the rate hike still exceeded her forecast.
In anticipation of future increases, Maude Paquette-Boulva has increased her mortgage payments from $2,000 to $3,000 since acquiring her property for $420,000. Even if she manages to adapt to this increase, she judges that “it’s really too expensive, it doesn’t make good sense”.
Impact variable
The Bank of Canada’s announcement does not necessarily shake all young buyers. If Dany Gosselin opted for a variable interest rate on the purchase of his duplex, in May 2022, it is to be able to refinance it without penalty. “I saw it more as an investment,” he explains.
Since he intends to convert his property in Longueuil into a rental property, the increase in the key rate does not destabilize him too much. “In the long term, with the rise in rents, I’m going to get my money anyway,” he says. Dany Gosselin believes that the increase in the key rate will further weaken first-time buyers, vulnerable to large investors “who are able to buy a block and put in 60% down payment”.
“Money in the trash”
Maude Paquette-Boulva and Rosemarie Gariépy do not regret having become owners. The new increase in the key rate, however, promises to increase the monthly payments of Rosemarie Gariépy by more than 40%, compared to their initial amount. The young woman “didn’t expect” such an increase, even if she and her spouse can absorb it. “You really feel like you’re pitching your money in the trash, ”she laments.
“We all grew up with a generation of parents [qui disent] that buying is the best thing to do,” emphasizes Maude Paquette-Boulva. However, she judges that at this moment, it is “really not so much an advantage, to be an owner”. She advises those thinking of buying a home to think twice. “With hindsight, it is still nicebeing a tenant,” she concludes.
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