The increases in interest rates announced by the Bank of Canada (BDC) in recent months to counter inflation might well have an impact for Canadians who have recently purchased or those planning to access property in the coming months.
BDC Senior Deputy Governor Carolyn Rogers acknowledged that in a speech to Young Canadians in Finance on Tuesday.
People who have taken out a variable rate mortgage are the ones who will suffer the most. “Adjustable rate mortgage underwriters who make variable payments have already seen their monthly payments increase significantly. For their part, holders of variable rate loans with fixed payments might see their payments increase if they reach their “limit rate”, that is to say the rate at which the monthly payments are used only to pay interest, and not repayment of principal,” said Ms. Rogers.
She also clarified that homeowners with a fixed-rate mortgage might see their monthly payments increase when it renews. Thus, with rising mortgage costs, home ownership becomes more expensive.
While we had seen an increase in housing prices, they started to fall once more in a modest way. “We need these prices to come down to restore balance to the Canadian housing market and make home ownership more affordable for more Canadians,” said the Senior Deputy Governor, adding that this drop might, however, create tensions for those who have recently purchased a property and who therefore see the value of their property diminishing, “which might limit their refinancing options”.
All in all, Carolyn Rogers believes that the Canadian economy will be resilient in the face of this crisis and that we should not see a recession as serious as the previous ones.
