Canadians have regularly scheduled monthly mortgage payments totalling approximately $9.265 billion as of the end of Q2 2022 (June 30)..That’s based on a total outstanding mortgage balance of more than $1.635 trillion during the second quarter of the year, according to latest data from Equifax using calculations from Canada Mortgage and Housing Corporation..The rate of mortgage growth is slowing, says betterdwelling.com, a data-driven housing news outlet..“Annual growth is now down from the decade high reached earlier this year,” Better Dwelling said in its analysis of the figures. “June’s 9.7% is the lowest rate of growth seen since May 2021. Prior to May 2021, this level of growth had only been seen since September 2008.”.“It’s just slower than February. Canadians were still racking up significant debts in June, despite higher interest rates, though June was before the massive 1-point hike we saw in July, that may have destroyed the last of the market’s exuberance for now.”.The Bank of Canada’s next rate adjustment will be on Sept. 7, with most analysts predicting a .75% increase, taking the rate to 3.25%, the highest it’s been since August 2007, when it hit 4.5%..The highest rate ever was 20.78% in July, 1981..An increase in the rate (a foregone conclusion) will result in higher monthly payments for about 80,000 customers with variable rate mortgages, said Royal Bank of Canada’s chief risk officer, Graeme Hepworth on the bank’s earnings call on Wednesday. .The increases will average about $200 a month, a level the bank feels most borrowers can afford.."Less than .5% of customers will require so much as a phone call to discuss the changes,” said Hepworth. “We can see the capacity in the vast, vast majority of that 80,000 mortgage customers.”.For many variable-rate mortgages, the monthly payment remains constant as interest rates rise with the portion allocated to interest growing and the part dedicated to paying down the principal shrinking. .But periods of large, rapid interest-rate hikes, which Canadians have experienced since March, can trigger larger monthly mortgage payments because banks aren’t allowed to let the portion covering principal vanish completely..“Variable-rate mortgages made up a growing portion of Royal Bank’s new mortgages this year and last, but they still account for less than 35% of the bank’s portfolio,” said Hepworth. “Customers with fixed-rate mortgages will face the impact of higher interest rates only when they renew the loans and will face a relatively modest increase if rates continue to rise.”.Fixed-rate mortgage holders typically lock in their interest rates for three to five years and then renew at the current rate, minus any available promotional discounts..About 17% of Royal Bank’s mortgage balances will come up for renewal by the end of 2023, the company said.Toronto-Dominion Bank chief economist Beata Caranci says the most significant impacts of the central bank’s rate hikes won’t be apparent until early next year..Caranci expects the bank’s rate will be 3.25% by the end of 2022..There are concerns the bank’s moves towards moderating inflation might well prove to be a cure that’s worse than the disease..“The challenge is inflation is a lagging and backward-looking indicator, and interest rates work with quite a big lag, meaning the peak impact and transmissions won’t be known until next year,” says Caranci..“So, if you keep increasing interest rates on the data that happened already in the past, there’s a very high risk that you over-correct, so you’d make a policy mistake, which would have major implications.”.“Once you’ve entered the territory of a policy mistake and you have to reverse course, it may be too late because the confidence levels may have already been undermined. And if you have already moved toward a recessionary cycle, it’s very difficult to undo that momentum.”.Regardless, Caranci remains optimistic about the Canadian economic system’s long-term stability..“I don’t think there’s a high prospect for a deep recession,” she says. “I’m 50-50 on the soft landing and the shallow recession. Why I don’t gravitate along to the deep recession is we don’t have the historical excesses that normally get you to a deep recession..“Given our forecast of a soft landing, we believe we’ve probably absorbed the bulk of the housing correction. We’ve had a significant recalibration in sales already and in average prices as people move away from high priced homes.”
Canadians have regularly scheduled monthly mortgage payments totalling approximately $9.265 billion as of the end of Q2 2022 (June 30)..That’s based on a total outstanding mortgage balance of more than $1.635 trillion during the second quarter of the year, according to latest data from Equifax using calculations from Canada Mortgage and Housing Corporation..The rate of mortgage growth is slowing, says betterdwelling.com, a data-driven housing news outlet..“Annual growth is now down from the decade high reached earlier this year,” Better Dwelling said in its analysis of the figures. “June’s 9.7% is the lowest rate of growth seen since May 2021. Prior to May 2021, this level of growth had only been seen since September 2008.”.“It’s just slower than February. Canadians were still racking up significant debts in June, despite higher interest rates, though June was before the massive 1-point hike we saw in July, that may have destroyed the last of the market’s exuberance for now.”.The Bank of Canada’s next rate adjustment will be on Sept. 7, with most analysts predicting a .75% increase, taking the rate to 3.25%, the highest it’s been since August 2007, when it hit 4.5%..The highest rate ever was 20.78% in July, 1981..An increase in the rate (a foregone conclusion) will result in higher monthly payments for about 80,000 customers with variable rate mortgages, said Royal Bank of Canada’s chief risk officer, Graeme Hepworth on the bank’s earnings call on Wednesday. .The increases will average about $200 a month, a level the bank feels most borrowers can afford.."Less than .5% of customers will require so much as a phone call to discuss the changes,” said Hepworth. “We can see the capacity in the vast, vast majority of that 80,000 mortgage customers.”.For many variable-rate mortgages, the monthly payment remains constant as interest rates rise with the portion allocated to interest growing and the part dedicated to paying down the principal shrinking. .But periods of large, rapid interest-rate hikes, which Canadians have experienced since March, can trigger larger monthly mortgage payments because banks aren’t allowed to let the portion covering principal vanish completely..“Variable-rate mortgages made up a growing portion of Royal Bank’s new mortgages this year and last, but they still account for less than 35% of the bank’s portfolio,” said Hepworth. “Customers with fixed-rate mortgages will face the impact of higher interest rates only when they renew the loans and will face a relatively modest increase if rates continue to rise.”.Fixed-rate mortgage holders typically lock in their interest rates for three to five years and then renew at the current rate, minus any available promotional discounts..About 17% of Royal Bank’s mortgage balances will come up for renewal by the end of 2023, the company said.Toronto-Dominion Bank chief economist Beata Caranci says the most significant impacts of the central bank’s rate hikes won’t be apparent until early next year..Caranci expects the bank’s rate will be 3.25% by the end of 2022..There are concerns the bank’s moves towards moderating inflation might well prove to be a cure that’s worse than the disease..“The challenge is inflation is a lagging and backward-looking indicator, and interest rates work with quite a big lag, meaning the peak impact and transmissions won’t be known until next year,” says Caranci..“So, if you keep increasing interest rates on the data that happened already in the past, there’s a very high risk that you over-correct, so you’d make a policy mistake, which would have major implications.”.“Once you’ve entered the territory of a policy mistake and you have to reverse course, it may be too late because the confidence levels may have already been undermined. And if you have already moved toward a recessionary cycle, it’s very difficult to undo that momentum.”.Regardless, Caranci remains optimistic about the Canadian economic system’s long-term stability..“I don’t think there’s a high prospect for a deep recession,” she says. “I’m 50-50 on the soft landing and the shallow recession. Why I don’t gravitate along to the deep recession is we don’t have the historical excesses that normally get you to a deep recession..“Given our forecast of a soft landing, we believe we’ve probably absorbed the bulk of the housing correction. We’ve had a significant recalibration in sales already and in average prices as people move away from high priced homes.”