British Columbians feeling the pressure ahead of tomorrow’s interest rate announcement

The CMHC predicts conventional 5-year fixed-mortgage rates could peak at as high as 6 per cent in the fourth quarter of 2022

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The Bank of Canada is expected to raise interest rates tomorrow by 50 to 75 basis points as the country continues to battle decades-high inflation, resulting in more pressure on homeowners. 

In B.C., 70 per cent of those with mortgages say their mortgage payments have increased or their amortization has been extended as a result of the rising rates. In addition, two-in-five are experiencing stress due to their inability to save for the medium or long term, according to a survey by Coast Capital and Angus Reid. 

On September 7, the policy rate reached 3.25 per cent and is expected to reach 4 per cent by the end of the year, according to the Canadian Mortgage and Housing Corporation (CMHC). Overall, this year saw policy rates rise by three percentage points, representing the biggest monetary policy tightening cycle. 

High mortgage rates will continue to weigh on the B.C. housing market throughout 2023, said the British Columbia Real Estate Association. With this in mind, it is important for homeowners to be proactive and understand the effect that tomorrow will have on their monthly home payments, says Jarfan Amjad, a mobile mortgage specialist with Coast Capital. 

“It would be the time now for the bank REITs or homeowners to see their financial advisers and have that discussion of short term and long term planning. Part of that would be to discuss if they should be extending their amortization,” he said. 

Conventional 5-year fixed-mortgage rates are predicted to increase and peak at as much as 6 per cent in the fourth quarter of 2022, according to the CMHC. 

“Once the monetary policy rate starts declining as inflation converges back towards its 1-to-3 per cent targeted range, this mortgage rate will decline and stabilize at 5.3 per cent by the second half of 2024,” said a CMHC report on the economy and housing. 

The pressure from inflation is being felt across the board, with three-quarters of British Columbians surveyed saying the overall cost of living and rising inflation are currently causing them financial stress. 

For those with fixed-rate mortgages who may have renewals coming up, Amjad recommends speaking to an expert to understand how the current rate hikes will affect payments after renewal. 

“I think we're living in times where it's really difficult for Canadians to be able to afford day-to-day spending, especially with their mortgage payments,” Amjad said.