Surging bond yields add to Canadian homeowners' mortgage pain as renewals loom
CTV
The roughly 75,000 Canadian homeowners awaiting mortgage renewal notices next month are bracing for a shock interest rate jump due to a surprise rise in global bond yields, which will further squeeze already tight household budgets.
The roughly 75,000 Canadian homeowners awaiting mortgage renewal notices next month are bracing for a shock interest rate jump due to a surprise rise in global bond yields, which will further squeeze already tight household budgets.
In Canada, homeowners can take out five-year mortgages, unlike in the U.S. where customers can snag a 30-year mortgage. This means many Canadians who locked into sub two per cent fixed-rate mortgages five years back are preparing for renewal letters with a steep rise in interest rates, made worse by the bonds selloff.
In some cases, renewed home loan rates could reach seven per cent, which would push up the average Canadian mortgage by at least a few hundred dollars per month, mortgage brokers estimate.
Canadians are already struggling to repay their debts amid high costs of living and rising interest rates. That has forced banks to put aside money in case of defaults, weighing on their overall profits.
With roughly about C$200 billion in home loans coming up for renewal next year, mortgage brokers and lawyers are preparing for more distress sales in the property market.
"We're having a lot of phone calls about people with concern... (about) what they should be doing to brace themselves for the maturity date, or the renewal of their mortgage," said Daniel Vyner, a broker at Toronto-based boutique mortgage firm DV Capital.
The rate for a five-year mortgage was about 5.34 per cent in November 2018 and the three-year was priced at 3.59 per cent in November 2020, according to data compiled by financial data firm Wowa Leads.
