The Latest in Mortgage News: Borrowers Growing Worried Over Rate Hikes

The Latest in Mortgage News: Borrowers Growing Worried Over Rate Hikes

Rising interest rates are causing significant concern among Canadians about their financial stability, as highlighted by the latest MNP Consumer Debt Index. With the Bank of Canada increasing its benchmark rate by 75 basis points, the prime rate has surged, impacting variable-rate mortgages and lines of credit. Fixed mortgage rates have also risen by roughly one percentage point due to a spike in bond yields.

The MNP survey reveals that 57% of Canadians are worried about the effects of rising interest rates, with 52% already feeling the impact. Additionally, 22% of respondents say they are not financially prepared for a one percentage point increase in rates. Grant Bazian, President of MNP Ltd., notes that the affordability crisis is pushing households to incur more debt, which becomes harder to service as interest rates climb.

Approximately 5% of mortgage holders are expected to renew their mortgages within the next year, likely at higher rates than their previous record lows. Bazian suggests that this heightened awareness among mortgage holders may help them better prepare for future rate hikes.

In other mortgage news, HomeEquity Bank reported over $1 billion in reverse mortgage originations in 2021, marking a 28% increase from the previous year and bringing its portfolio to $5.4 billion. The bank anticipates continued growth as more Canadians near retirement and seek to access their home equity while staying in their homes.

Bloom Financial, a new reverse mortgage provider, has expanded its services to British Columbia, allowing homeowners aged 55+ to access home equity with deferred interest payments. Bloom aims to convert housing wealth into purchasing power for retirees, particularly in B.C., where home prices have significantly risen.

Lastly, Newton Connectivity Systems will offer its Velocity broker operating platform in French starting May 1, enabling bilingual navigation and business operations for mortgage brokers and agents across Canada.