Yahoo Finance Posthaste: Some Canadians are regretting their mortgages amid high interest rates
Canadian homeowners are having regrets over their current mortgage as they face unexpected increases in their monthly payments, says one new study.
Over a third of homeowners say they have mortgage regrets and 21.8 per cent say they can’t afford their payments because of consistent interest rate hikes from the Bank of Canada, according to a survey of 1,000 Canadians by The Real Estate and Mortgage Institute of Canada (REMIC), which provides education for licensing of mortgage and life insurance agents in Ontario.
Interest rates have climbed to five per cent since March 2022, fuelling an increase in mortgage rates. That’s left 30.2 per cent of homeowners saying they would have bought a cheaper property had they known rates would climb so much.
“Buying a home is an exciting, emotional and adrenaline filled process,” REMIC chief executive Joe White said in a press release. “Sixty to 90 days after a purchase, the homebuyer’s adrenaline can turn to regret if they’ve overextended themselves and (their home) can become a place that they sleep at and pay off forever.”
Close to half (45.2 per cent) of homeowners think they won’t be able to pay off their mortgage until they are 60. Some think it could take until age 70 (8.2 per cent), 75 (4.6 per cent) or even 80 or more (8.2 per cent) to be mortgage-free.
But people are still putting in the effort to make their mortgage payments, even if they need to cut back on other expenses to do so, White said.
“A home is the last thing that Canadian homeowners would default on because their families need a roof over their heads,” he said. “Everything else suffers, (like) cancelled vacations, high interest from carrying a balance on credit cards and overall quality of life.”
Some homeowners (12.3 per cent) regret being locked in at a bad rate, though most (58.2 per cent) say they don’t know their exact monthly mortgage payments “without looking them up.”
What’s more, 59 per cent are unable to quote the Bank of Canada’s current policy rate and 68.4 per cent are unsure what their mortgage payments would be if it reached five per cent — the current rate.
“Our survey is clearly showing that Canadian homebuyers need to educate themselves more on the basics of taking on a mortgage and its lasting financial impact,” White said.
More than half (57 per cent) of homeowners had a bank arrange their mortgage, which could be part of the problem, according to White.
“Having blind faith in banks could be an expensive mistake for homebuyers,” he said. “Homeowners tend to blindly and gratefully take what they are told from the bank and spend less time comparing mortgage rates than they do comparing credit cards.”
The survey found that 10.5 per cent of Canadians believe banks always have the best mortgage rates and 21.2 per cent feel they give them the best rates because they are loyal customers. But White suggested people may want to reconsider that notion.
“Canadians believe that a bank would never give them a mortgage that they can’t afford, but is a bank really concerned about your quality of life and factoring that into the monthly mortgage calculation?” he said.
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Tech companies aren’t yet ramping up hiring after massive layoffs over the past year, despite a surge in interest in artificial intelligence, requiring workers with special skills. Still, job cuts in the tech industry appeared to slow in June and July and are on track to be even lower this month. — Bloomberg
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Today’s data: Teranet-National Bank housing price index; industrial product and raw materials price indices; construction investment; monthly credit aggregates; U.S. quarterly services survey
Earnings: Deere & Co., Estée Lauder Companies Inc.
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Today’s Posthaste was written by Noella Ovid, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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