Everybody who got a mortgage in either 2020 or 2021 should expect to pay 30% more on monthly payments in the next four years.
A new report by the Bank of Canada says that indebted Canadians could struggle to meet the demands of their mortgage agreements, with those who agreed to a variable rate plan seeing the largest increase in monthly dues.
Payments on average are expected to go up by $420 a month or 30% by the time 1.4 million homeowners who acquired a house during that time period renew their mortgages.
People who got a variable rate mortgage could see a shocking increase to $2,730 a month or $1,080 more than current rates.
“Even as the average household is in better financial shape, more Canadians have stretched to buy a house during the pandemic,” Bank of Canada Governor Tiff Macklem said.
“And these households are more exposed to higher interest rates and the potential for housing prices to decline.”
House prices have skyrocketed over the last few years, with the bank reporting a 50% increase in costs.
“If those in highly indebted households lose their jobs, they would likely need to reduce their spending sharply to continue servicing their mortgage,” Macklem said.
“This is not what we expect to happen … But it is a vulnerability to watch closely and manage carefully.”
Conservative Party leadership hopeful Pierre Poilievre has pinned the blame for current financial woes onto Macklem, whom he promised to fire if elected prime minister.
“I would replace him with a new governor who would reinstate our low-inflation mandate, protect the purchasing power of our dollar, and honour the working people who earned those dollars,” Poilievre said.
He also released a housing plan to base municipal funding on how many houses cities and towns can get built.
“I will require severely unaffordable big cities like Toronto and Vancouver to increase home building by 15 per cent or lose some of their federal infrastructure funds,” said Poilievre.
“I will create a building bonus that pays municipalities 10,000 dollars for every extra home built, and I will require cities to pre-approve permits for high-density housing and employment at the future stations of all federal funded major transit projects”.