Rate Hike Effect: 1 In 3 Mortgage Owners Believe They’ll Have To Sell In 10 Months

According to a new Yahoo Canada/Maru Public Opinion poll, one-third (35%) of homeowners with a financial encumbrance believe they won’t be able to ride out the latest Bank of Canada prime lending rate hike to 4.50% for more than 9.7 months. This means a third of mortgage borrowers believe they would be forced to sell or vacate their home for another arrangement in just under 10 months.

After 10.4 months, 35% of individuals with a fixed-rate mortgage said they will be compelled to sell or depart their home for another arrangement.

The deadline becomes two months shorter for homeowners with variable/adjustable mortgages or a line of credit. According to the survey, 45% of Canadians with variable-rate mortgages could ride out today’s interest rate levels for 8.3 months before needing to sell or evacuate their property while 45% of those with a home equity line of credit thought they would be able to remain stable with current interest rates for 8.3 months before being forced to give up their homes.

For the eighth consecutive meeting, the Bank of Canada opted to raise its overnight rate in face of persistently high inflation, with the effective rate currently sitting at 4.5%, marking one of the sharpest and most aggressive tightening cycles in the bank’s history. With inflation sitting at 6.6% last month and the labour market at full employment by technical definition, some economists believe the Governor Tiff Macklem is surely going to tip Canada’s economy into a recession.

The encroaching effect of the rising interest rates are also so wide, even homeowners without any type of loan and have their homes free from encumbrance are saying they are being affected by rising rates. Around 52% of those homeowners without a loan or mortgage say they are feeling the effects of the recent rate hikes.

The rate hikes have also caused anxiety among homeowners, with those who have their homes on a line of credit being the most anxious at 46%, followed by those with a fixed rate mortgage at 44%.

According to Maru executive vice-president John Wright, the Bank of Canada’s aggressive rate hike cycle will be difficult for many, particularly those who entered the real estate market in 2020 and 2021 based on an outlook “that in no way suggested rates would be taking the steep upward turn they have.”

“While the Bank of Canada is using interest rate hikes as a blunt instrument to wrestle inflation to the ground, there is a real human consequence to what was not anticipated, especially with inflation still high, debt loads increasing to cover the spread, and a slowing economy that could well create a recession that tosses people out of work,” Wright said.

Between January 23 and 24, Maru Public Opinion polled 3,074 Canadian people. Within this sample, 1,920 Canadians who own their home were interviewed, with a margin of error of +/- 2.2% 19 times out of 20.

Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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