The Canada Mortgage and Housing Corporation (CMHC) has released a report predicting even more rising interest rates, reaching approximately 6-7%, the timing of which couldn’t be worse for many homeowners.
“This steep interest rate hike is coinciding with a time when households are facing historically high levels of debt and higher cost of living,” CMHC’s report stated.
Since March 2022, one-third of homeowners with mortgages have experienced gradual hikes in their monthly mortgage payments.
This rising rates hit particularly hard for those with variable-rate terms, as indicated by CMHC: “In the first half of 2023, more than 290,000 mortgage borrowers renewed their mortgage with a chartered bank at a higher interest rate: from 5.45% for a 5-year fixed rate to 7.38% for a variable rate.”
The report also states that in the next two years, a staggering 45% of all outstanding mortgages will be up for renewal where the homeowners will experience “interest rate shock.”
For those who purchased homes at record-high prices and record-low interest rates, this translates to potential increases of 30-40% from their previous rates.
CMHC warns of the impact on overall housing affordability and the potential for households to find themselves in more precarious financial situations.
“These larger mortgage payments are making the Canadian economy more susceptible to negative shocks or downturns.”
$27 million in bonuses amid housing affordability crisis
In July, it was reported that CMHC awarded themselves $27 million in bonuses in 2022, despite the fact that Canadians are facing the most unaffordable housing market in recent history.
Since 2020, the CMHC has paid out $75 million in bonuses to employees.
The Crown corporation claims they are “driven by one goal: housing affordability for all.”
