Survey suggests majority of Ontario mortgage holders concerned about upcoming renewals
A new survey suggests that a majority of Ontarians who will be renewing their mortgages in the next 18 months are worried about costs going up.
The Royal LePage survey conducted by Nanos found that 21 per cent of respondents in Ontario will be renewing lease agreements within the next year and another 15 per cent will be up for renewal 12 to 18 months from now. Of those, 74 per cent are worried about it, given the series of rate hikes from the Bank of Canada.
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The survey was conducted before the Bank of Canada's announcement on Wednesday that it would hold its key interest rate at 5 per cent after several rate increases since March 2022, when the overnight lending rate was 0.25 per cent.
Of those concerned about renewing, more than a quarter of respondents said they have considered either extending the amortization period (28 per cent) or switching lenders (27 per cent). Twenty per cent said they might extend their mortgage term, while 16 per cent said they are considering reducing the next term. Fifteen per cent might switch to a fixed-rate mortgage and 16 per cent said they might switch to a variable rate mortgage.
"Banks are aware of this apprehension, and are preparing for many Canadians to shorten their next mortgage term or negotiate other changes," said Royal LePage Wolle Realty sales representative Shawn Ramautor in a news release. "Homeowners are considering all options on the table, including lengthening their amortization period in order to lower their monthly payments."
More than two thirds of respondents in Ontario said their amortization period of 20 years or more. Sixty per cent of respondents reported a mortgage value of between $101,000 and $500,000. More than a third (37 per cent) of Ontario respondents said they had paid off less than 25 per cent to date.
Variable-rate holders facing financial struggles
Rising rates have had put a strain on homeowners with variable-rate mortgages in particular. Forty-six per cent of variable-rate or hybrid mortgage holders in Ontario said that the higher interest rates have put major financial strain on their household, while 30 per cent said it was a minor strain.
The strain has meant cutting back on spending. Fifty-four per cent said they've cut back on discretionary spending like travel and going out to eat, but 52 per cent also said they're cutting back on essentials like groceries and utilities. Many people (45 per cent) are putting less of their income into savings. Forty per cent have had to dip into savings to cover expenses. None of the respondents in Ontario said they've skipped a mortgage payment, but five per cent said they're now selling their homes.
Royal LePage says that while fixed-rate holders have dodged some of this strain in the last year and a half, it won't last forever.
"Most understand that the time will come when they will renew their mortgage in a very different borrowing environment – a more expensive one," Ramautor said. "As such, mortgage holders are preparing in advance for this inevitable increase, shopping around for the best rate and weighing all their options."
Canadian mortgage-holders positioned to handle rate increases
The survey said that of those who have a variable-rate or hybrid mortgage, 64 per cent across Canada said that higher interest rates have caused their mortgage payment to hit its trigger rate – when the mortgage payment no longer covers the interest portion – and have subsequently caused their monthly payments to increase.
"There is no doubt that Canadians' financial stability has been put to the test over the last few years. In addition to home prices skyrocketing in 2021 and the start of 2022 – followed by interest rate increases that have caused monthly mortgage payments to rise by hundreds, if not thousands, of dollars – the cost of everyday essentials like food and fuel have also surged," said Royal LePage COO Karen Yolevski.
Yolevski said that while there are concerns about rising rates, Canadians are typically cautious when it comes to finances and the Canadian economy could help shield people from the worst outcomes.
"Canadians generally tend to err on the side of caution when it comes to their finances, and we believe this has served them well. Our financial institutions are well positioned to support consumers through one of the largest and most important purchases of their life," Yolevski said.
"Canada's strong employment rate and the rigorous lending practices of our major banks continue to ensure that a vast majority of households are able to navigate these financial challenges without having to sell their homes."
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