Half of variable rate mortgage holders are struggling to keep up financially with their mortgage payments, according to a new survey from the Angus Reid Institute.
Regardless of mortgage type, 77 per cent say that they are concerned for their next mortgage renewal and are worried about the additional cost future renegotiations could bring. One-third of all mortgage holders are having difficulty managing their payments.
“People are really worried about the effect that rising interest rates are going to have on their mortgage, especially when it comes to renewing your mortgage,” said Jon Roe, a research associate at the public opinion research foundation.
“We did find that variable rate mortgage holders were a little bit more worried about that next renewal coming up. They're a little bit more exposed to these higher interest rates that are coming in because of the Bank of Canada's rate hikes.”
Sixty-five per cent of those surveyed with a variable rate mortgage said they cut back on discretionary spending in the last few months, with 50 per cent pulling money from savings and 15 per cent selling an asset like a car, according to Angus Reid’s May 2 poll.
The Bank of Canada has raised interest rates eight times since March 2022. The current rate sits at 4.5 per cent, up from 0.5 per cent when the recent spate of rate hikes began.
The survey shows a correlation between being in a bad place financially and the amount of time remaining on a person’s mortgage.
For those with a mortgage term of 25 years or more, 34 per cent are in bad financial shape. This falls to 25 per cent for 15-year mortgage terms and 13 per cent for those whose mortgage terms will end within five years.
“[People with longer mortgage terms] may have entered the market last year or so, at the peak of the market, or they didn't put as much of a down payment on so they need to extend these mortgages and could be extending their finances a little bit. Those are the people who are more likely to say that they're struggling financially overall,” said Roe.
Those with variable rate mortgages are equally as likely as renters to be struggling financially, with Roe equating the difficulty of keeping up with a mortgage with a renter who may be struggling to balance monthly rent payments.
“Close to half of renters say that they're finding it difficult to pay their rent every month and that's the same proportion of what variable rate mortgage holders are saying,” he said.
Overall, renters are more likely than homeowners to be struggling financially, according to survey results.
