Canadian homeowners are under pressure from the Bank of Canada to raise interest rates, with 1 in 3 saying they won’t be able to tolerate rate hikes for some time before they are forced to sell their homes.
35% of Canadian homeowners say they can handle the Bank of Canada’s current benchmark interest rate of 4.5% in an average of 10 months or less before being forced to sell or move out of their home. That’s according to his Yahoo/Maru poll of 1,920 Canadian homeowners released Thursday.
Research shows that how long Canadian homeowners can sustain today’s interest rates depends on the type of mortgage and how it’s financed.
According to the study, 45% of Canadians with variable rate mortgages can weather current interest rate levels for 8.3 months before selling or moving out of their homes. Her 45% of those with credit lines at home said they could keep the current interest rate level for her 8.3 months.
Homeowners with fixed-rate mortgages are feeling less pressure than homeowners with variable-rate mortgages and mortgages. A poll found that his 35% of people with fixed-rate mortgages could survive a 4.5% interest rate for her 10.4 months.
The Bank of Canada raised its benchmark overnight rate by 25 basis points last month. It was the eighth straight rate hike to 4.5%, the highest level since December 2007. Household spending has been restrained, especially when it comes to housing and big-ticket items.
“We raised interest rates by 425 basis points on a cumulative basis last year. said at a press conference where they discussed
“But these interest rate hikes are working across the economy to try to rebalance demand. Inflation is coming down…and it will be worth it.”
Maru’s executive vice president, John Wright, said the Bank of Canada’s aggressive rate-hiking cycle has been a big deal for many, especially those entering the real estate market in 2020 and 2021. A sharp upward turn.”
“As a result, this quarter is likely to see many Canadians who opted for variable mortgages with low interest rates at the time and are now forced to sell at significant losses and face financial ruin. It’s possible,” Wright said.
“The Bank of Canada is using rate hikes as a blunt instrument to eradicate inflation, but especially with inflation still high, the debt burden rising to cover spreads, and an economic slowdown triggering a recession that will put people out of work. There is a possibility.”
The survey found that 11% of Canadians said rising interest rates had forced them to make “significant economic adjustments and lifestyle changes”, while 22% said it caused “very serious pressure”. I understand too. Another 38% said the recent rate hike “has caused anxiety, but it is manageable,” and 29% reported that the rate hike has had no significant impact at all.
Of those who have made dramatic financial adjustments and lifestyle changes, 19% reported having a variable mortgage, compared to 11% for fixed-rate mortgages and 9% for home credit lines. were compared. Of those who said they had not experienced any significant impact, 48% reported having no loan, 22% had a line of credit, and 20% had a fixed-rate mortgage. , 14% have variable rate mortgages. .
Maru Public Opinion surveyed 3,074 Canadian adults between January 23rd and January 24th. Among this group, her 1,920 Canadians who own homes were interviewed, with an estimated margin error of +/- 2.2% in 19 of 20.
Alicja Siekierska is a Senior Writer for Yahoo Finance Canada. follow her on her twitter @alicjawithaj.
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