Rising Number of Mortgage Holders Concerned Over Higher Payments: Survey

A person walks by a row of houses in Toronto on July 12, 2022. (The Canadian Press/Cole Burston)

A rising number of Canadian mortgage holders say they are struggling to make payments as interest rates rise and the cost of food goes up.

Recent numbers from an Angus Reid survey show that one in six, or 15 percent, of mortgage holders say they find payments “very difficult.” That number has doubled since March, according to the survey authors.

Additionally, 54 percent said they find it difficult to buy enough to eat given the rising costs of food.

“Half (49 percent) say they are in a worse financial position than they were last year, while 35 percent expect to be in a worse position a year from now,” the study says.

Nearly 80 percent of those with a mortgage expect things to get worse when it comes time to renew. Angus Reid’s survey found that 40 percent were “worried” they would face higher payments after renewal, while 39 percent said they were “very worried” about higher payments.

“Those facing renewal in the next 12 months are spooked more than others, with a majority ’very worried' (57 percent) their monthly payments will rise significantly,” the authors said.

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Although the survey found that mortgage holders with fixed-rate mortgages are more likely to find mortgage payments manageable (57 percent), they are also more likely to be “very worried” (43 percent) about higher payments when they renew their mortgages, compared to 29 percent of those with a variable mortgage.

The numbers come just 10 days after the country’s chief bank inspector warned that homeowners could be facing “significant payment shock.”

There are currently $246 billion in variable rate mortgages that were negotiated with fixed payments, and as interest rates rise, those fixed payments are going more to pay off interest than the principal of the loan.

“Mortgagors will have to make up the deferred principal pay downs when they renew,” Superintendent of Financial Institutions Peter Routledge said, according to Blacklock’s Reporter. “This means they are at risk of suffering a significant payment shock.”

Pause Predicted on Interest Rates

With the Bank of Canada planning an interest rate announcement on Oct. 25, economists have predicted it will keep interest rates steady at 5 percent for the next six months, according to Reuters. They’ve also forecasted a drop in interest rates in 2024.

Randall Bartlett, senior director of Canadian economics at Desjardins, said the decision would be a “hawkish hold.”

“It will recognize the economy has cooled more quickly than it anticipated back in July and inflation in September, particularly core inflation, demonstrated a pace of slowing that provides us with some room for cautious optimism,” Mr. Bartlett said.

It’s a position held by economists at RBC, who are also predicting the Bank of Canada to hold rates.

“Economic data releases since the Bank of Canada opted to forego an interest rate hike in September have been mixed, but we expect that they on net have made a hike at next week’s decision unlikely,” wrote RBC assistant chief economist Nathan Janzen and economist Claire Fan in a client note on Oct. 20.

David Wiechnik and Reuters contributed to this report.