Faced with rising interest rates, the majority of Quebecers who have taken out a mortgage loan are afraid of renewing it. To limit the increase in their monthly payments, some are considering changing lenders or extending the amortization of their loan.
These are some of the findings that emerged from a survey conducted by the Nanos firm on behalf of Royal LePage in September. According to this survey, in Quebec, more than a quarter (28%) of residential mortgage loan holders will have to renew their loan contract within a year and a half. And among them, a large majority (79%) say they are concerned about this imminent renewal.
Faced with this situation, 23% of mortgage loan holders in Quebec who are worried about their renewal are considering “switching to another lender”, and 22% are considering extending the amortization period. Up to 19% say they are considering selling their property to buy a smaller one so their loan amount is lower.
Homeowners with a fixed-rate loan – the rate chosen by three-quarters of borrowers – have so far been spared from rate increases, but they will soon have to “adapt to much higher borrowing costs” , underlines Martin Philippe, real estate broker and spokesperson for Royal LePage.
For this reason, Mr. Philippe recommends that owners plan their budget accordingly, and contact their lenders to see what solutions are available to them.
Financial pressure linked to the variable rate
“Since the start of the rise in rates, it is really the holders of a variable rate mortgage who have suffered the repercussions,” says Mr. Philippe.
Since the start of the rate hike, it is really the holders of an adjustable rate mortgage who have suffered the repercussions
Indeed, still according to the same survey, in Quebec, 33% of these borrowers declare that the increase in interest rates has exerted “major financial pressure” on them, 42% affirm that this pressure has been “minor”, while that 20% indicate that they have “not been affected” by the increase in rates.
To accommodate this increase in their mortgage payments, 45% of holders of an adjustable rate loan reduced the amount of their discretionary spending, in particular by limiting their outings to restaurants or postponing their travel plans.
42% have lowered the amount they put aside each month in order to absorb the increase in their payments, and 33% say they have had to dip into their savings to achieve this.
Moreover, 60% of them indicate that they have reached their trigger rate – a level where mortgage payments no longer cover the capital portion, but only the interest.