Rising Mortgage Rates Gutting Personal Finances

Global News BC had a story reflective of many homeowners in the Metro Vancouver and Fraser Valley region struggling with rising mortgage payments. 

Click here for a direct video link to 'Gutted': Amid rising mortgage rates, B.C. couple sells home to go back to renting.

The cold hard truth is that the near zero interest rates we've seen in the past decade or so was a historical anomaly as the cost of money was artifically suppressed by reckless central banks like the Bank of Canada. This broken price signal encouraged many people to take on way more debt (especially mortgages) than they should have.

I always advise my buyer clients to stick with traditional affordability metrics that will ensure someone will be able to shoulder the total carrying costs of homeownership over the entire amortization life cycle, with ups and downs in mortgage rates. It is reckless and irresponsible to have assumed that record low interest rates were a new normal. Reversion to the mean is something people are beginning to understand, in the context of historical mortgage rates.

Current mortgage rates aren't high. They are in the range of historically normal and homeowners need to budget their cashflow as such. 

To the credit of the couple in this news segment, they made a responsbile decision to downsize; downsizing is a topic that I have previously written extensively about. The couple in question, in terms of a silver lining, is now going to be able to save money and gain more financial balance in their life. This is prudent and I think this is an idea that more and more over-extended Metro Vancouver homeowners will need to seriously consider.