A new survey shows the struggles that millions of Canadians are having as rates rise
As a long-term investment, most Canadians agree that homeownership works out great, but along the way there are often bumps in the road including unexpected expenses.
However, for many homeowners the prospect of interest rates rising so sharply in a year, coupled with the household budget squeeze caused by inflation, means they now wish they had made different mortgage choices.
Results of a survey by The Real Estate and Mortgage Institute of Canada (REMIC) reveals that 30% of respondents regret the mortgage they are currently in, 22% say it’s unaffordable due to rate hikes, and 12% say they are locked in at a bad rate.
However, 30% would not have bought a smaller home if they had known mortgage rates were going to rise.
Not that poll participants are that switched on about the rates they are paying with 41% saying they don’t know the current Canadian interest rate and 17% uncertain. More than two thirds said they don’t know what their mortgage payments would be at a 5% interest rate (the current rate).
Over half (58%) of Canadians admit that they don't know their exact monthly mortgage payments without looking them up.
Relying on the bank
The lack of knowledge about rates reflects the trust that Canadian homeowners have in their bank.
Almost 6 in 10 respondents’ mortgages were arranged by their bank and 43% believe that banks always have the best rates, and 58% believe they will also get the best rates as a loyal customer.
"Having blind faith in banks could be an expensive mistake for homebuyers. Homeowners tend to blindly and gratefully take what they are told from the bank and spend less time comparing mortgage rates than they do comparing credit cards," said Joe White, president and CEO of REMIC. "Canadians believe that a bank would never give them a mortgage that they can't afford, but is a bank really concerned about your quality of life and factoring that into the monthly mortgage calculation?”
White added that the best brokers should advise a balance between buying a home and reasonable quality of life.
Mortgage until retirement
The poll also found that almost half of respondents believe they will be paying off their mortgage until they are approaching retirement, age 60. But 8% think they will be 70 before they’re mortgage free, 5% think they will be 75+, and 8% think they will be at least 80.
"Our survey is clearly showing that Canadian homebuyers need to educate themselves more on the basics of taking on a mortgage and its lasting financial impact. This is exactly the kind of information that they would be getting from a licensed mortgage broker and a big part of the advantage of using a broker to secure a mortgage," concluded White.
