The macro backdrop is a plus for falling inflation: Former portfolio manager
More than half of Canadian homeowners with a mortgage are concerned about an increase in their payments upon renewal, according to the latest RATESDOTCA and BNN Bloomberg survey.
The survey, conducted by Leger, found that 53 per cent of those surveyed said they were concerned about payments when their mortgage renews.
Most respondents said they have a plan in place to deal with higher payments. Fifty-two per cent said they had a plan, with 38 per cent of those saying they will cut back on their spending, nine per cent saying they’ll dip into savings, and two per cent saying they plan to take on additional debt. Only two per cent said they would sell their house in light of higher mortgage rates.
The survey was released as the Bank of Canada continues its aggressive rate-hike campaign to bring inflation under control. On Wednesday, the central bank increased its key overnight rate by 50 basis points, bringing it to 3.75 per cent.
Fixed-rate mortgages are now all north of five per cent, far from what was being offered last year, when it was possible to get a five-year fixed rate under two per cent.
According to the survey, 20 per cent of Canadian homeowners said they don’t have a plan to deal with higher mortgage rates. This breaks down to 14 per cent of those “concerned” and 28 per cent of those “not concerned.”
The survey also asked respondents how likely they are to shop around once they're mortgage is up for renewal.
Fifty-one per cent of Canadians said they did not plan to change lenders upon their renewal to get a better mortgage rate, with another nine per cent saying they did not even know that was an option.
Choosing not to shop around at renewal time can cost you tens of thousands of dollars over the term of your mortgage. That’s because lenders have no incentive to offer you a competitive rate upfront at renewal. By not shopping around and comparing their options, consumers are leaving money on the table.
Keep in mind, however, that if you choose a new lender, you will have to go through the stress test again. The survey found that this is not an option for everyone: six per cent of respondents said they’d like to switch lenders at renewal, but they’re worried that they can’t pass the stress test.
BNN Bloomberg has teamed up with RATESDOTCA to take the pulse of Canadians every month on key pocketbook issues as we strive to better understand how households are navigating COVID-19. This is the latest instalment in monthly special coverage.
An online survey. 1,529 Canadians, 18+. Completed between October 14 and 16, 2022, using Leger’s online panel. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, though, a probability sample of 1,529 respondents would have a margin of error of ±2.5%, 19 times out of 20.