Latest Bank of Canada rate increase to 4.75 per cent will likely drive an uptick in consumer delinquencies, affect recent rebound in home prices
two groups who are overwhelmingly choosing fixed rates in the current environment.
For example, a homeowner with a mortgage of about $664,000 amortized over 25 years, an adjustable rate of 5.55 per cent and a monthly payment of around $4,100 would see their rate climb to 5.
Canadians who have accumulated debt through lines of credit will also see their payments go up. While many borrowers use home equity lines of credit, the rate increases will also affect Canadians who don’t own a home and have been relying on unsecured lines of credit, which aren’t backed by an asset such as real estate.
For some Canadians who hold mortgages with variable interest rates and fixed installments, the rate hike will mean hitting the so-called trigger rate – the interest rate level at which the payment amount can no longer make a dent in the mortgage principal and 100 per cent of it goes toward covering the interest.
These borrowers, though, will face payment shock at renewal, when lenders reset amortizations back to the original schedule, experts warn.research Over the past year, borrowers with fixed‑rate mortgages taken out five years prior have been facing “materially higher payments” at renewal, Mr. Mendes and Figueiredo noted in their report in late May.
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
READ: Full text of Bank of Canada's latest interest rate decision - BNN BloombergThe Bank of Canada raised its key interest rate target by a quarter of a percentage point to 4.75 per cent on Wednesday. Here is the text of the central bank's rate announcement.
Read more »
What to know about latest Bank of Canada interest rate increaseIt is the first raise since it announced a pause in January
Read more »
World Bank offers dim outlook for global economy in face of higher interest ratesThe World Bank estimates that the international economy will expand just 2.1% in 2023 after growing 3.1% in 2022
Read more »
World Bank offers dim outlook for the global economy in face of higher interest ratesThe global economy is likely slowing sharply this year, hobbled by high interest rates, the repercussions of Russia's invasion of Ukraine and the lingering effects of the coronavirus pandemic.
Read more »
World Bank offers dim outlook for the global economy in face of higher interest ratesThe global economy is likely slowing sharply this year, hobbled by high interest rates, the repercussions of Russia's invasion of Ukraine and the lingering effects of the coronavirus pandemic.
Read more »
Canada's housing market not showing impact of higher interest rates: Report - BNN BloombergHome prices in some of Canada’s most populated cities rose in May, showing resilience amid the heightened interest rate environment, a new report has revealed.
Read more »