As interest rates rise, so do homeowners' concerns

With interest rates on the rise, some homeowners are concerned about how the changes will affect their mortgages.

Fiona Cushing-Allan is one of them.

Cushing-Allan and her partner bought a bungalow last year. They’re locked into a fixed-rate mortgage that she considers reasonable, but it’s up for renewal in two years.

“I guess I’m just going to brace for impact when that happens to us,” said Cushing-Allan, a first-time homebuyer. “I feel like as a millennial, I'm used to getting hit every couple of years with a new small crisis, so I'll just ride this one as we've rode all the other ones.”

Homeowners aren’t alone. Experts say the Bank of Canada’s interest rate hike of 1 per cent is bad news for borrowers.

Variable mortgage rates will go up from about 2.7 per cent to 3.7 per cent, according to James Mckeown, an associate mortgage broker with Premiere Mortgage Centre.

“On a $400,000 mortgage—which is close to the average price people are paying today—would be about a $150 increase on your mortgage payments,” Mckeown said.

This isn’t the first time fixed mortgages have risen in recent years.

“Last July, a fixed-rate mortgage was under two per cent,” Mckewon said, noting that current rates are closer to five per cent or above.

Compounding COVID-19 with inflation and now mortgage rates, the owner of Lady Luck Boutique, Cathy Hope, believes some customers are starting to spend less.

Besides business costs, the owner has her own home mortgage to worry about.

“I have a line-of-credit mortgage, so obviously that’s going up,” Hope said. “Which means while I’m able to pay that off at my own rate, I’m also looking at my own business and the success of my business effects the rate at which I’m able to pay off my own mortgage.”

In the Halifax Regional Municipality (HRM), realtor Shane Anderson believes the housing market is softening in some areas, but it hasn’t reached a plateau.

“I think the interest rate is going to have an effect on that. It's just a matter of time. This wasn't going to last forever,” Anderson said.

Anderson said in the HRM there are about 700 homes available—down from 1,000 this time last year—but the price of homes is still up about 18 per cent from last year.

“Some areas are stronger than others,” he said. “The conversations we’re having with sellers now is your home is not going to sell as much as your neighbour did five months ago.”