credit and debt
UP, UP, AND AWAY As rates have risen at an unprecedented pace and scale, Canadians' mortgage interest obligations have predictably followed suit, having increased by a staggering amount for some.
We noted in the last edition of the rennie landscape that variable-rate mortgages represent a growing share of the Canadian market (up to one in three mortgage dollars specifically). So given that backdrop it’s hardly surprising that Canadian’s mortgage interest obligations have been rising quickly alongside rising rates, even as new credit declines. In fact, in the last year alone, the total annual interest owed on mortgages in Canada increased by 61%, even though the total outstanding debt increased by only 5%. Of course those interest rate increases aren’t felt evenly across mortgage holders,
as variable-rate borrowers are subject to every rate increase from the Bank of Canada, while fixed-rate borrowers are only exposed upon renewal. So it makes sense then, that interest obligations on variable-rate mortgages in Canada are up a whopping 105% in the last year, and are now five times higher than they were just two years ago. Meanwhile on fixed- rate mortgages, borrowers with terms of less than three years are paying an additional 182% in interest, while those with terms of less than five years are paying 61% more. Lastly, those with terms of five years or more are paying just 1% more in interest, as most of those borrowers simply haven’t renewed yet.
FEELING THE SQUEEZE TO GREATER DEGREES
$70
pre-pandemic
pandemic recovery
rate tightening cycle
$60
JUN : $30 Billion variable rate interest
$50
$40
JAN : $5 Billion variable rate interest
$30
$20
$10
$0
2017
2018
2019
2020
2021
2022
2023
VARIABLE RATE
FIXED YEARS
FIXED YEARS
FIXED YEARS
SOURCE: STATISTICS CANADA. TABLE 10-10-0006-01 DATA: AGGREGATE INTEREST COSTS ON MORTGAGE FUNDS OUTSTANDING BY TYPE, MONTHLY, CANADA
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