Canadians with mortgages and those who want to buy a home are struggling to make the budget work according to multiple reports
The Canadian housing market would be put under increased pressure if the Bank of Canada makes a surprise rate hike this week.
With rates up sharply from a year ago, any further upward move would exacerbate struggles for millions of Canadians with mortgages and put a further obstacle in the path of those who desperately want to buy a home.
Several reports this week point to the impact of higher rates on homeowners and buyers, with mortgage payments often the last straw to break when household budgets are squeezed.
Almost half of mortgage holders (45%) told an Angus Reid Institute poll that they were already finding their monthly payment hard to afford, up from 34% a year ago.
Three in ten respondents to the same poll reported that their overall debt burden was a major source of stress, and 51% said it was a minor source.
Delaying home purchase
Meanwhile, a poll from BMO reveals that 68% of Canadians are planning on waiting until mortgage rates drop to purchase a home while 20% are unsure when they will be able to buy.
Meanwhile 69% are planning on waiting to refinance their home until mortgage rates drop.
A separate CIBC survey shows that despite 71% of respondents citing homeownership as an important financial goal, 82% of mortgage holders and 64% of renters are concerned about how inflation and rising rates will affect their ability to make mortgage payments or keep up with rental costs.
This will likely mean current owners staying in their current home longer. The survey found that 40% may consider selling their home when economic conditions stabilize.
Rates this week
Millions of homeowners and would-be owners will be looking for some relief when the Bank of Canada announces its latest rate decision Wednesday (June 7).
Although a rate cut is unlikely, a rate hike this month is also not expected.
An expert panel convened by Finder.com shows that 88% believe the central bank will not announce a change this soon with 75% agreeing that would be the best strategy.
“There is a chance the BoC hikes rates at the June meeting given strong jobs numbers and sticky inflation,” explains James Knightley, chief international economist, ING. “But the BoC also acknowledges that monetary policy operates with long and varied lags. We suspect they will look to keep monetary policy in its currently ‘restrictive” state before cutting rates aggressively to a more neutral level in early 2024.”
Atif Kubursi, president of Econometric Research, concurs that a rate cut may not happen until next year as the BoC will want to be sure that inflation is under control.
“Come 2024 there is the possibility that the economy would start to experience a possible slowdown that would persuade the bank to reduce slightly its lending rate,” he said.
