Bank of Canada\u0027s interest rate increase has jolted highly indebted consumers, who took out large mortgages during the pandemic. Read more.
Higher rates are also slamming the brakes on Canada’s once red-hot housing market and, as consumers feel the pinch, could slow spending on travel, dining out and luxury goods.
“There’s going to be a lot of pain out there. And I think the bank is underestimating the risks to both housing and consumption,” said Stephen Brown, senior Canada economist at Capital Economics.Article contentThe moves have sentspiralling, a concern for Canadians with variable rate mortgages, which accounted for about 50 per cent of new mortgage loans in Canada in May, compared with about seven per cent pre-pandemic, official data shows.
We now find ourselves in a situation where the value of our houses might be going down and the mortgages are going upMost Canadians with variable mortgages have static payments: as rates go up the monthly instalment stays the same but less principle gets paid. But about 20 per cent of variable loans are not static — meaning each hike can add hundreds of dollars to a payment.Article content
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