Higher for Longer Interest Rate Outlook

The Canadian Press has a story out today titled: Homeowners brace for mortgage payment shock amid higher-for-longer rate outlook.

This is a sobering look at the state of mortgage borrowers in Canada right now. There is a very high percentage of homeowners with mortgages (~46%) that currently have amortizations extending past the conventional 25 years. This obviously means that the interest portion of mortgage payments are or will be taking a larger and larger share of the payments, as principal repayment is stalled and stretched out.

Higher for longer mortgage rates could mean indebted for longer.

It could be that we will see more forced selling of homes if there is a crackdown on this newfound practice of negative amortization mortgages. If at renewal, stretched homeowners can't make lump sum payments or higher regular mortgage payments, they may not have much choice but to sell over the next couple of years.

If you find yourself in the unfortunate situation of having a condo, townhouse or house, whether your primary residence, or an investment property, that you can no longer afford to support, selling is a viable option. The market at the time of writing is still fairly balanced and it may be better to list and sell sooner than later, especially if the inventory of homes for sale on the market begins a new trend upwards over the coming months.