If interest rates go up, 1 in 4 Canadians will have to sell their homes:

[applegrove]

Link to tweet

[DonCoquixote]

1. china is drooling

They get the eat the rest of Canada

[elleng]

2. Why? Please explain.

If one already owns a home, mtg has worked since it 'closed.'

[Alexander Of Assyria]

4. Mortgage stress test imposed by Bank of Canada have been exceeded by many homeowners.

New higher stress imposed now so new buyers and old, renewing mortgagees have to meet the higher income to payment stress test.

On the other hand Canada has witnessed an average national home price increase of 20% since start of 2021, spread fairly evenly. So that’s not too shabby news for the sellers.

[Fiendish Thingy]

13. Canadian mortgages reset every five years

If you got a loan in 2020 when rates were dropped to emergency levels due to COVID, you might be paying 1.5%-2%; in 2025, you might be paying 6-8% (current rates are at around 5%). Even people who got a mortgage in 2017 for around 3.5% are going to be shocked when they see what their payments will be at 5-5.5% this year.

Estimates are that some buyers could see their payments balloon by 30-40%, depending on their specific terms and when they renew.

[elleng]

16. OYE!

[brush]

3. Why? Their homeloan mortgage rate won't go up.

And if they sell the house they still have to have a place to live and rents are influenced upwards by inflation.

[Alexander Of Assyria]

6. Mortgage rates are going up is the entire reason, the income to payment ratio is set by the feds.

Same income, substantially higher payments means affordability problem.

[brush]

9. Ahhh...that's for people looking to buy a home...

not for people who already own a home.

[Fiendish Thingy]

12. Canadian mortgages reset every five years.

It’s different than 30 year fixed in the US

[drray23]

5. are all Canadian mortgage variable interest rate ?

If not this makes no sense.

[Alexander Of Assyria]

7. Yes, many took out variable rate terms, large minority if recollection serves....rates where

under 2% for closed 5 year variable rate…it’s now over 5% and climbing.

[elleng]

8. OYE! THAT explains it.

[jimfields33]

10. The old "get a good deal" without looking to the future.

I never could understand the greed of people. Now they will be shocked that it didn’t turn out the way they thought. Probably will blame the banks for giving them the loans.

[Alexander Of Assyria]

18. Maybe, but home prices are up 20% across Canada in last 18 months.

[Fiendish Thingy]

14. Whether fixed or variable, loans reset every five years- you can't get a 30 yr fixed in Canada

[Alexander Of Assyria]

19. You can get a 30 year fixed rate mortgage in Canada but the interest is nuts.

Never heard in my lifetime anyone with a 30 year mortgage fixed rate.

Most mortgages are 5 year fixed rate, 25 year amortization, that’s the gold standard.

[captain queeg]

11. I remember my sister had one of those variable rate loans beck in the 70s

In the US. They ended up selling when the rate went double digit.

[True Dough]

15. That's right

and although it seems unlikely that we'll see double-digit rates again in the future, one never knows. But the sad part is that some new homeowners are stretched too thin and they cannot afford mortgage rates of even 5%. It was too narrow a margin in the first place. One should have more breathing room than that, but with real estate having ballooned in value over the past decade, and accelerated during Covid, affordability isn't what it once was.

[captain queeg]

17. That's for sure. I sold my house about 5-6 yrs ago

I’d been underwater due to a divorce and once I could sell it and pay it off I jumped on it. Wasn’t in any hurry to buy again and now I couldn’t if I wanted to. But I’m retired now and renting suits me fine.

[ironflange]

20. Wow, I'm glad my mortgage has gone bye-bye