Higher mortgage rates are souring many Canadian homeowners’ views on the housing market overall, a new survey suggests.
The Canada Mortgage and Housing Corp. (CMHC) released the results of the survey on Wednesday that polled some 4,000 mortgage holders in January about how their attitudes have changed amid the rapid rise in interest rates over the past year.
The Bank of Canada raised its benchmark interest rate to 4.5 per cent at the end of the month, where it’s remained after two consecutive pauses since. That’s up from 0.25 per cent in 2022, which means Canadians are paying more on their variable-rate mortgages immediately and on fixed-rate products when they renew their terms.
Bank of Canada raises key interest rate again, will pause further hikes
Almost three-quarters of all mortgage holders (74 per cent) said they have already been affected or expect to be impacted by the higher rates, according to CMHC.
Of those feeling the pinch of higher rates, almost half (49 per cent) said they were struggling to pay down their debt.
The CMHC survey arrives as the Bank of Canada says it’s keeping its eye on the housing market, but isn’t yet seeing “alarm bells” that high interest rates will lead to a wave of Canadians defaulting on their mortgages.
Tiff Macklem, governor at the central bank, said at an event in Toronto last week that while mortgage delinquencies have been ticking back up, they are normalizing to pre-pandemic levels.
“We are acutely aware that some Canadians have been very squeezed by the interest rate increases,” Macklem told the crowd Thursday.
Higher mortgage rates have affected how consumers are feeling about the mortgage process itself, the CMHC said, with perceptions dropping to their lowest levels in five years.
The shock of higher rates is also pushing some to re-evaluate homeownership from an investment point of view.
Some 81 per cent of respondents to the survey said they felt homeownership was a good long-term financial investment, but that’s down from 91 per cent in 2022.
Real estate prices forecast to rise
Only 55 per cent of mortgage holders felt the value of their homes would increase in the next 12 months, down from 84 per cent last year.
Affordability and uncertainty in the market remain a major concern for Canadians.
Some 61 per cent of buyers — both first-time and repeat — are feeling uncertain about the buying process, with their top concern listed as potentially paying too much for their home.
More than a third of owners (35 per cent) said they faced unexpected costs during the homebuying process.
Some 37 per cent of buyers who received a monetary gift to help buy their home said they couldn’t have afforded a property that met their needs without the boost.
To learn more about how you can break into Canada’s housing market, check out Global News’ Home School series here.
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