The Bank of Canada continued to pile on the rate pain this summer, and mortgage holders are feeling the brunt.
The Real Estate and Mortgage Institute of Canada (REMIC) reported on Wednesday that “mortgage malaise” is setting in amongst borrowers, with 34% saying that they regret their current mortgage, and an additional 12% saying that they regret being locked in at a “bad rate.”
REMIC’s data, which stems from an online survey of 1000 random Canadians, comes on the heels of Statistics Canada's (StatCan) latest inflation reading. On Tuesday, the government agency revealed that the Consumer Price Index edged up 3.3% year over year in July. The same measure came in at 2.8% in June.
The mortgage interest cost index is to blame for the gain says StatCan. Mortgage costs shot up close to 31% year over year last month as Canadians renewed and initiated at a higher rate, adding almost an entire basis point onto the overall CPI.
Circling back to REMIC’s survey, it also reveals that 45% of current borrowers believe that they will be paying off their mortgages until the age of 60, while 8% think that they will be making payments until they’re 80 or older. Even so, just 30% of borrowers indicate that they would have purchased a less expensive property if they anticipated the conditions they are contending with today.
Joe White, President and CEO of REMIC, stresses that there are repercussions associated with consumers so readily overleveraging.
“A home is the last thing that Canadian homeowners would default on because their families need a roof over their heads,” he says. “Everything else suffers, cancelled vacations, high interest from carrying a balance on credit cards, and overall quality of life.”
White also draws attention to a pretty widespread lack of mortgage knowledge amongst borrowers — 58% of respondents admit to not knowing what their monthly mortgage payments are “without looking them up,” according to REMIC — saying that “Canadian homebuyers need to educate themselves more on the basics of taking on a mortgage and its lasting financial impact.”
Finally, it seems that Canadians are putting too much bank in their banks. REMIC reports that 57% of respondents had a bank arrange their mortgage, while close to 58% say that they trust their banks to give them the best mortgage rates because they are “loyal customers.”
But having blind faith in your bank can be an “expensive mistake” to make, says White.
"Canadians believe that a bank would never give them a mortgage that they can't afford, but is a bank really concerned about your quality of life and factoring that into the monthly mortgage calculation? The best brokers will advise with balance between purchasing a property and a reasonable quality of life. A homeowner who qualifies at a bank with great credit can do very well with a mortgage broker and get a very competitive rate."
