rates
STICKER SHOCK: RENEWING AT HIGHER RATES The majority of Canadian borrowers choose fixed-rate mortgages, with a strong preference for the five year fixed product (more on this trend later). These borrowers have been
years ago, so renewers are faced with higher interest costs at renewal. The average today is 4.80% compared with 2.99% five years ago, meaning the average renewer faces an additional 1.81 percentage points on their next mortgage, ouch. But the good news is that they were likely stress-tested to 4.99% five years ago, and could have afforded that rate back then. Add in that incomes have risen over the past five years while mortgage balances have been paid down and today’s renewers are, in aggregate, able to handle their new rates.
sheltered from rising rates in the short term, only being exposed upon renewal. For these renewers, the pace of discounted fixed rate increases from below 2% to around 5% isn’t particularly relevant. What matters more is the difference between the rate they’re paying now and the new rate at renewal. Today’s discounted fixed rates are undoubtedly higher than they were five
RENEWING OUR INTEREST IN FIXED MORTGAGE RATES
6.0%
5.0%
4.80% 4.99%
4.0%
3.0%
2.99%
2.0%
1.81%
1.0%
0.0%
-1.0%
-2.0%
RENEWAL
ORIGIN.
RENEWAL DIFFERENTIAL
ORIGINATING RATE ADJ. FOR STRESS TEST
RENEWED FROM
RENEWED AT
DATA: AVERAGE DISCOUNTED 5-YEAR FIXED MORTGAGE RATES, MONTHLY, CANADA
SOURCE: RATEHUB
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