For most Canadians, a mortgage is the biggest loan they鈥檒l ever take on in their lifetime. Following the Bank of Canada鈥檚 historic rate hike cycle, the cost of borrowing money has put a significant strain on households from coast to coast to coast.
Over the next year-and-a-half, 44 per cent of all mortgages will be up for renewal in Canada. To help guide consumers through these uncertain financial times, 麻豆影视 reached out to roughly 60 mortgage brokers across Canada with a list of questions. Their answers provide professional guidance for individuals and families searching for clarity and sound advice.
Speaking with CTV National News, Toronto mortgage broker Ron Butler points out that 鈥渁ffordability is bad everywhere, if you were close to your budget at your old mortgage rate, you may be over your budget at your new mortgage rate.鈥
In May 2019, the Bank of Canada鈥檚 key interest rate sat at 1.74%. During the pandemic, the key rate dropped to .25%. Today, it sits at a lofty 5.00%.
, Canada Mortgage Housing Corporation鈥檚 deputy chief economist, has found that 鈥渁 lot of mortgage consumers are actually facing significant financial stress. There's a lot of indicators that are telling us that borrowers are actually struggling a little bit more than we thought.鈥
Amanda and Jeff Cooper live in Southwestern Ontario in the small town of Dorchester with their two children. The family of four have outgrown their current home, which is now for sale. They鈥檙e preparing to close on a new house they recently bought for their family; though they鈥檙e still unsure what type of mortgage is best for their short- and long-term needs.
鈥淚 feel like it鈥檚 a huge, huge gamble and a risk. Just considering where everything is, not knowing what鈥檚 going to happen in five years from now,鈥 said Jeff.
The mortgage rate they secured at the end of 2020 for their current home was 1.7%. Amanda shared that 鈥渘ow we鈥檙e looking at mortgages (for their new home) in the range of five per cent. It鈥檚 a significant difference for sure.鈥
The couple are now pondering a decision that may have a significant impact on their future financial outlook. They鈥檙e leaning towards a short-term, fixed rate, and are working closely with a trusted mortgage broker.
鈥淲e鈥檝e gone through both options out there between fixed and variable,鈥 said Jeff, who goes on to add that they鈥檙e 鈥渞unning the numbers both ways to see what works best for [their] situation.鈥
In a nationwide questionnaire to mortgage brokers, 麻豆影视 inquired about the best type of mortgage to have right now, and for how long?
(Gary Monson / 麻豆影视 Graphics)
Fifty-nine per cent of brokers shared that a short-term, fixed mortgage is currently the right choice to make. Just 7% said variable, and 34% said it depends (based on an individual鈥檚 current situation).
For the last 12 months, Butler has been telling his clients 鈥渢o take a two- or three-year fixed mortgage.鈥 He reasons that 鈥渨e don鈥檛 know how far (interest rates) will go down and we don鈥檛 know how fast it will happen; a short-term fixed may be the answer.鈥
麻豆影视 asked Canadian mortgage brokers if an individual can trust a bank for mortgage renewal advice.
(Gary Monson / 麻豆影视 Graphics)
Twenty-nine per cent said yes, 51% said no, and 20% said it depends.
Butler said that banks are in the business of making money. 鈥淚t is unusual that a bank would give its lowest possible offer at renewal the first time, every time,鈥 he said. 鈥淭he highest possibility is it will offer a somewhat higher rate and then if you negotiate with them they may come down.鈥
For those currently stuck in a sky high variable mortgage, 麻豆影视 asked brokers across Canada if you should get out of a variable mortgage if you are currently in one.
Nineteen per cent said yes; 49% said no; with 32% feeling that it depends on each individual鈥檚 situation.
Ottawa-based mortgage broker Frank Napolitano said if you have a variable mortgage, 鈥測ou鈥檝e managed to get through the worst of the rates. If all economists are correct and interest rates and the Bank of Canada start to reduce, then best to wait this out for a few more months so you can lock in at a better rate.鈥
The CMHC is forecasting an . Bourassa-Ochoa said that by 2026, the CMHC鈥檚 鈥渂aseline forecast brings us to between 2.5 and 3 per cent. But that said, (interest rates) are still going to be significantly higher than what they were.鈥
The Coopers are hoping, like many Canadians, for a steady decline in interest rates from the Bank of Canada. 鈥淚 hope to see them lower, to make life more affordable for everybody,鈥 said Amanda, who has family members who are struggling to purchase their first home.
As for the best rates in the country -- according to the brokers who took part in our questionnaire -- the lowest fixed rate mortgage can currently be found in London, Ont., and Saskatoon, at 4.34%. The lowest variable rate can be found in Toronto at 5.90%.
Butler gives this closing advice to anyone currently looking for a mortgage that best fits their needs: 鈥淪hop like crazy. There鈥檚 a lot of rates available online, it鈥檚 very easy so just shop,鈥 he said.
鈥淭hen once you鈥檝e found the best possible answer, don鈥檛 go long term. Sometimes the five-year rate will be tempting, but possibly the three-year rate will end up better for you in the long run.鈥
Visualizations by Charlie Buckley and Gary Monson; Edited by Phil Hahn
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