Housing markets across Canada have taken homeowners and renters on a wild roller coaster ride over the last three years and while it appears the buying and selling aspects are starting to level out, it’s behind the scenes where most uncertainty exists..That uncertainty comes from the Bank of Canada’s aggressive rate hikes over the past year and what it means at mortgage renewal time..The bank paused its increases and most market watchers believe it will hold the line for the balance of 2023, which should give mortgage holders a clearer picture of what lies ahead..A new study from the non-profit Angus Reid Institute (ARI) finds 30% of homeowners are having a tough or difficult time with their mortgage, rising to 51% among those with a variable rate..Regardless of whether they have a fixed, variable, or other type of mortgage, ARI found 77% of Canadian homeowners are worried about the additional cost future renegotiations could bring..Those concerns rise to 91% among those with mortgage terms where 25 or more years are left in their amortization schedule, dropping to 44% among those with five or fewer years remaining..Housing affordability is a concern for owners and renters alike, with 46% of the latter saying they’re in poor or terrible financial straits right now, according to ARI. Among owners, that number drops to 27%, however, those who hold a variable rate mortgage are significantly more likely to say they’re facing challenges, as the variable rate has increased from close to 1% to more than 5% in 18 months.. Angus Reid graphicAngus Reid graphic .ARI found being in a ‘bad place’ financially correlates with the time remaining on a mortgage. Those who purchased most recently are most likely to report challenges, whether from the capital needed to make the purchase, or the changing financial conditions which have made their purchase more difficult to handle.. Angus Reid graphicAngus Reid graphic .Canadians with variable rate mortgages are more likely than those locked in to say they find making mortgage payments a challenge, with 46% of renters, who often find their rents increase as their landlords’ mortgage costs rise, are struggling with their monthly rent.. Angus Reid graphicAngus Reid graphic .Variable rate holders, seeing their payments increase over the past year are more likely to say they've been cutting back in other areas of their lives, including delaying major purchases or contributions to savings, but Canadians from all walks of life made their own financial adjustments in recent months, says ARI..“Indeed, two-in-five have withdrawn money from accounts they try not to touch. This rises 10-points higher among those with variable rate mortgages. Homeowners are also more likely than renters to have sought out a loan from a bank or other financial institution,” says the report..Interest rate increases exposed homeowners with variable rate mortgages the most, with economists estimating two-thirds of variable rate mortgages will have reached their trigger rate with the Bank of Canada hike in January, meaning a larger share of those monthly payments will be going toward interest rather than paying down the principal on the loan. .“Still, even fixed rate mortgage holders will feel the effect as many have to renegotiate their rates every five years,” says ARI. “Notably, 77% of those on fixed mortgages are as likely as those on variable rate ones, at 77%, to say they are worried about their next mortgage renewal.”.Homeowners who purchased recently, and those who extended their mortgage terms to lower monthly payments are more concerned about their next renewal than those who have a short time left, with 56% with terms of 25 years or more saying they are very worried their next renewal will significantly increase their monthly payment. That proportion falls as the respondents’ terms shorten.. Angus Reid graphicAngus Reid graphic .Depending on the area of the country, prices fell year-over-year, but haven't dropped below pre-pandemic levels, representing a significant appreciation in value for most Canadian homeowners if they bought prior to 2020..“This is reflected in the fact that 75% of mortgage holders say they would make a little or a lot of money if they were forced to sell their home today,” says ARI..“Those who have the longest term remaining, possibly those who purchased at the peak of the price spike last year, are the most likely to say they would lose money if they were forced to sell, at 24%.”. Angus Reid graphicAngus Reid graphic
