Majority say they could still afford home after rate hike: survey

An interest rate hike of two per cent would leave four-in-10 Canadians unsure about whether they could afford their homes, according to a new study from the Bank of Montreal.

TORONTO — An interest rate hike of two per cent would leave four-in-10 Canadians unsure about whether they could afford their homes, according to a new study from the Bank of Montreal.

The survey, compiled for BMO by Leger Marketing and released Wednesday, found 43 per cent believe an interest hike would either hamper their ability to pay or leave them on unsure footing.

One-in-five Canadians surveyed said a two per cent rise would hurt their ability to make mortgage payments, while 23 per cent said they were unsure if a rise would affect them.

The report also found 57 per cent of respondents believe they could still afford their home if interest rates spiked two per cent.

The survey findings come as some of Canada’s biggest banks begin raising variable mortgage rates, even though the Bank of Canada’s overnight interest rate remains unchanged.

That could signal the end of the era of cheap borrowing that has encouraged many Canadians to take on houses they may not have been able to otherwise afford.

BMO anticipates that the Bank of Canada will begin increasing interest rates from the current one per cent next year.

Many in the mortgage industry have recently advised homeowners to take on the previously less-popular variable mortgage rates as interest rates had remained low since the end of the recession, when the Bank of Canada pushed its overnight rate down to an emergency low 0.25 per cent.

But looking ahead, some industry watchers say now is the time to consider switching to lock in longer term rates with shortened amortization periods.

“Our interest rate outlook now projects that fixed mortgage rates will trump variable. While the decision ultimately depends on the individual, the low rate combined with a shorter 25-year amortization will significantly strengthen household financial stability,” said Doug Porter, deputy chief economist at BMO Capital Markets.

In a report issued last week, Porter and colleague Benjamin Reitzes argued that with the U.S. recovery gathering steam, central bankers on both sides of the border are becoming more comfortable with the economy and less so with historically depressed interest rates.

Already, financial markets have priced in a near 50 per cent chance that Bank of Canada governor Mark Carney will start hiking his one per cent policy setting before the year’s end, they noted.

Both Finance Minister Jim Flaherty and Carney have recently flagged the danger to the economy of Canadians becoming increasingly indebted, mostly through taking advantage of low rates to buy homes or take out home equity loans. Household debt to disposable annual income is above 150 per cent and likely to rise further toward the 160 per cent level that preceded the housing collapse in the U.S., say analysts.

Just Posted

Rebels drop home opener to Oil Kings

The Edmonton Oil Kings were simply better than the Red Deer Rebels… Continue reading

Diesel spilled in Penhold neighbourhood

Penhold Fire Department responded

House fire in Penhold

Damage estimated at $30,000

Red Deer Players host play reading for public

Audience feedback for playwright

Sylvan Lake cleanup cancelled

Weather prompts cancellation

RDC Kings topple Medicine Hat College Rattlers

Kings Matheus Alves scores twice in the win

Nurse leads Canada over South Korea 82-63 at FIBA Women’s World Cup

TENERIFE, Spain — Kia Nurse poured in 29 points to lift Canada… Continue reading

Aretha Franklin exhibit debuts with eye toward her legacy

DETROIT — The Detroit museum that hosted Aretha Franklin’s public visitations after… Continue reading

‘Anaana’s Tent’ passes Inuit songs, legends, language to a new generation

In Pangnirtung, Nunavut, on the eastern tip of Baffin Island, Rita Claire… Continue reading

Housing data decision opens door to real estate innovation, say realtors

TORONTO — Realtor Daniel Steinfeld has wanted to post home sales data… Continue reading

Ty Long kicks winning field goal, Lions come back to beat Ticats in OT

VANCOUVER — Ty Long was eager for a special moment, and he… Continue reading

Indigenous eateries take centre stage in Canada thanks to increasing awareness

VANCOUVER — Since Paul Natrall started serving Indigenous cuisine from his Mr.… Continue reading

Canada’s capital region reeling after intense tornado rips through communities

OTTAWA — Parts of Canada’s national capital were still reeling Saturday after… Continue reading

Coaches, players on Alberta university rugby team buckle up for the Broncos

LETHBRIDGE, Alta. — The head coach of the University of Lethbridge Pronghorns… Continue reading

Most Read