The BoC has already raised its rate four times this year, taking it from 0.25% to 2.5% in the fastest pace of rate hikes in three decades. That has increased the interest portion of variable-rate borrowers’ monthly payments, but so far, few loans have hit their trigger rates, and monthly payments have remained steady.
Rabidoux noted that these borrowers all passed the mortgage stress test, which last year would have required them to qualify for a loan at a hypothetical rate of 5.25%.Some Borrowers May “Panic” Rabidoux suggested some of these borrowers may “panic” and switch to a fixed-rate mortgage out of fear rates will rise further — what he described as “a self-induced payment shock to avoid a potential future payment shock.”
“We don’t know yet what that’s going to look like, but introducing somewhat distressed supply into a weak resale market is not ideal,” Rabidoux said., sees the greatest pressure coming from the private lender segment of the mortgage market. Private lenders offer less creditworthy borrowers mortgages at much higher rates, and Butler expects some mortgages will be “called” as rates rise even further. That is, borrowers will be asked to pay off the balance immediately.
It’s not only a question of how high interest rates will go, but how long they will stay elevated, Butler said.
danieltencer BenRabidoux ronmortgageguy Why wait until the fall? Our mortgage went up $693 as of August because of renewals
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