It seems that Canadians are a little out of the loop when it comes to their own mortgages.
The Real Estate and Mortgage Institute of Canada (REMIC) painted a pretty dismal picture of Canadian borrowers earlier this month, reporting that 58% can’t recall what their monthly mortgage payments are “without looking them up.”
REMIC also revealed that 68% of current borrowers are “murky” on what their monthly payments would be if the Bank of Canada raised its policy rate to 5% (and mind you, the rate hit 5% in July) including close to 32% who say they don't know and over 36% who say they’re unsure.
There’s shock value to those figures — at first blush, they’re uncomfortably high and seem to point to a sort of irreverence in a high-stakes borrowing scenario — but experts point out that mortgage holders these days are facing an unusual level of nuance. Interest rates haven’t held steady for more than a few months at a time since last March, and mortgage rate volatility has certainly been one of the fallouts.
Andy Hill, mortgage broker and Co-Founder of ratefilter.ca, says that it makes sense to him that only a portion of borrowers — and he surmises those with an adjustable-rate product, as well as fixed- and variable-rate carriers who are up for renewal — would be hyper-aware of their monthly mortgage payments, as only some are “at the whim” of interest rate fluctuations.
“If they're not coming up for renewal, if they're not an adjustable-rate mortgage, effectively, they have no reason to make that sort of calculation at this specific time,” he says.
Similarly, Victor Tran, mortgage and real estate expert with RATESDOTCA, notes that it’s not uncommon for current borrowers to be less “in tune” with the broader market dynamics that inform things like mortgage rates as they move away from the initial purchase of their home, saying that consumers tend to be “reactive as opposed to proactive.”
“They usually look into these sorts of things when they actually have to,” he adds.
With another BoC rate decision slated for next week, Tran urges borrowers coming up for renewal in the coming months to be proactive: “shop around” with different lenders and, although predictions are mixed on whether the bank will opt to hike or hold, consider locking in a rate preemptively.
“If rates go up, you're protected at a slightly lower rate. If the rates go down, then great, you just reapply for that new rate hold or a new pre-approval,” he says.
Tran also notes that, while the BoC’s policy rate dictates the prime rate, which is then tied to variable-rate mortgages and lines of credit, consumers can follow the Canada government bonds for some insight into fixed-rate mortgage products.
"As Canada government bonds increase, fixed rates will also increase. And vice versa — if bond yields are coming down, fixed rates will also come down,” he says. “And people can monitor that online. You can just Google ‘Canada five-year government bond’ or ‘three-year government bond.’ And the fixed rates are tied to those directly.”
But regardless of the bank's next move or the type of mortgage scenario Canadians are finding themselves in, Hill stresses that there’s power in doing your homework and not just relying on “experts” to inform your next mortgage move (or sticking with the same product out of convenience.)
“You really want to do a little bit of research into the mortgage you're currently in and what you're being offered,” he says. “Look at the bank that you bank with, look at what other banks have available, look at the broker network — I think all of those avenues are good to explore. Just like one would with any other investment, you want to check out the variety of different options available, and then be empowered in your own decision making.”