Mortgage Renewers Facing Higher Rates

April 9, 2018

Over half of all mortgages held by the Big Six banks will come up for renewal in the next three years—and most of those borrowers will likely be renewing into higher rates.

In fact, mortgage rates are already materially higher than they were five years ago when the average 5-year fixed mortgage rate was around 2.99%. That’s thanks to three rate hikes from the Bank of Canada and elevated 5-year government bond yields.

The prospect of rates going higher have many a homeowner wondering how much their monthly payments could rise at renewal.

intelliMortgage CEO Rob McLister offered perspective on this in a recent interview with Canadian Business.

With additional rate hikes potentially on the horizon, McLister said it’s possible that some homeowners could renew into rates that are up to 75 bps higher than their current rate.

“On a $300,000 mortgage with a 25-year amortization, that works out to an additional $97 per month,” he noted.

The good news is that most mortgage balances will be lower than they were five years ago. “Remember, the majority of folks who’ve paid a mortgage for five years have whittled down their balance and amassed equity,” he said. That means, worst case, most homeowners could refinance if cash flow was tight and they needed to lower their payments.

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