2022 has been an interesting year – interesting might be putting it lightly.
There have been seven interest rate hikes, yes 7, implemented by the Bank of Canada in 2022. Some people are starting to worry they won’t qualify for their mortgage and others are worried they won’t be able to afford their current home payments if rates continue to increase.
Last week, Canada’s central bank raised its interest rate to 4.25%. Now, many people in Saskatchewan are worried about renewing their mortgages under the new rate. Many Canadians are.
Canada’s five biggest banks moved swiftly to match the bank’s increase, raising their prime lending rates by the same 50 basis points (.5%).
This new interest hike is going to make a big difference in how much people pay in their monthly payments due to much higher interest rates.
Many Canadians are worried it’s going to be extremely difficult to renew their mortgages. The interest rate for some households is going to be twice as much.
As an example of interest rate hikes:
someone who bought their house at $300K 5 years ago would have payments around $1450 per month. Now with the new interest rates the new payments would be about $1750 a month. That’s a difference of $300 a month or $3600 a year. Some people are seeing great monthly payments of $500+ a month.
What’s Next: Are more interest rate hikes coming in 2023?
According to the BOC, yes, we can expect more interest rate hikes in 2023.
It is forecasted that there will be a total of 50 to 75 basis points [.50% to .75%] over the next two hikes based on past Bank of Canada announcements and the state of the current bond market.
However, it really depends on how high the inflation is. Interest rates could go higher.
What Does This Mean For My Mortgage:
The best advice we can give to homeowners is to contact your bank and learn about all your options. Make sure you are in a position where you can make your payments and still live comfortably.
As always if you need help buying or selling your home please reach out to Gregg Bamford or Ryan Bamford