Is a massive wave of mortgage defaults coming to Sask.? One Regina broker says no
With the Bank of Canada (BoC) increasing its key rate once again this week to 4.75 per cent, many people with fixed-rate mortgages are feeling anxious about renewing.
Canada’s key interest rate is now the highest it’s been since April 2001.
Skott Enns, a mortgage broker with TMG The Mortgage Group in Regina said the latest increase, which was the first one since January, came as a surprise to many experts.
“Yeah, I think this one did take people by surprise,” Enns said. “Inflation numbers in April had increased marginally and evidentially that was all it took for the Bank of Canada to decide it was time for another increase.”
In April, inflation rose for the first time in 10 months to 4.4 per cent.
Despite the latest increase, Enns said he doesn’t believe Saskatchewan will see a plethora of mortgage defaults in the coming months.
“If you bought a home in 2018 Regina’s average house price was $325,000 and a ballpark rate back then would have been 3.54 per cent with a five per cent down payment, which meant you’d have a monthly payment of $1,629. Fast forward to today and if your mortgage is coming up for renewal, your new rate is probably going to be just a hair over five per cent, which would mean a difference of $220 [more] a month.”
Enns said one thing that could help save some people, specifically those who bought a home in the past six years, is the mortgage stress test that was implemented by the federal government in 2016, a test Ens admits he disagreed with when it was first announced.
“So all of those people that were qualified at those lower rates, even though they were two and a half per cent, they were still qualifying at about five per cent [because of the stress test]. So it’s not as though they were necessarily at the upper end of their spending limit in reality,” Enns said.
Enns also said that typically speaking, most people will be making more money than they were five years ago as they progress in their careers and gain more experience in the working world.
“I understand costs everywhere are going up, but hopefully you’re also in a better position financially as well,” he said.
One year ago, the BoC’s key interest rate was 1.5 per cent.
In July 2022, an increase of a full percentage point was announced, which was followed by three smaller increases heading into 2023 leading to today’s key rate of 4.75 per cent.
The next scheduled rate announcement is expected on July 12, 2023.
Enns said with this week’s surprising increase, the crystal ball is as foggy as ever, but said many in his industry remain hopeful some rate decreases are coming.
“Within the next say 12 months, I think that is a reasonable expectation.”
Enns admitted that while the days of one and two per cent for variable and fixed rates are more than likely gone for good, a middle ground from then to where we are now is achievable.
“We got spoiled, you know, for the better part of a decade really with those rates. If we can get back to a point where, you know, fixed rates even start with a three, I think that would be wonderful.”
-- With files from CTV News.ca.
CTVNews.ca Top Stories
DEVELOPING Man sets self on fire outside New York court where Trump trial underway
A man set himself on fire on Friday outside the New York courthouse where Donald Trump's historic hush-money trial was taking place as jury selection wrapped up, but officials said he did not appear to have been targeting Trump.
Mandisa, Grammy award-winning 'American Idol' alum, dead at 47
Soulful gospel artist Mandisa, a Grammy-winning singer who got her start as a contestant on 'American Idol' in 2006, has died, according to a statement on her verified social media. She was 47.
She set out to find a husband in a year. Then she matched with a guy on a dating app on the other side of the world
Scottish comedian Samantha Hannah was working on a comedy show about finding a husband when Toby Hunter came into her life. What happened next surprised them both.
'It could be catastrophic': Woman says natural supplement contained hidden painkiller drug
A Manitoba woman thought she found a miracle natural supplement, but said a hidden ingredient wreaked havoc on her health.
Young people 'tortured' if stolen vehicle operations fail, Montreal police tell MPs
One day after a Montreal police officer fired gunshots at a suspect in a stolen vehicle, senior officers were telling parliamentarians that organized crime groups are recruiting people as young as 15 in the city to steal cars so that they can be shipped overseas.
Vicious attack on a dog ends with charges for northern Ont. suspect
Police in Sault Ste. Marie charged a 22-year-old man with animal cruelty following an attack on a dog Thursday morning.
The Body Shop Canada explores sale as demand outpaces inventory: court filing
The Body Shop Canada is exploring a sale as it struggles to get its hands on enough inventory to keep up with "robust" sales after announcing it would file for creditor protection and close 33 stores.
Tropical fish stolen from Beachburg, Ont. restaurant found and returned
Ontario Provincial Police have landed a suspect following a fishy theft in Beachburg, Ont.
U.S. FAA launches investigation into unauthorized personnel in cockpit of Colorado Rockies flight to Toronto
The U.S.’s Federal Aviation Administration is investigating a video that appears to show unauthorized personnel in the cockpit of a charted Colorado Rockies flight to Toronto.