The experts and media are all abuzz over the very real possibility that interest rate increases are on the horizon. The real question homeowners (and prospective homeowners) need to ask themselves, is whether or not they can really handle an increase.
“First-time buyers should stress-test their mortgage to ensure they are well financially prepared for home ownership and a potential upswing in interest rates, not only to manage costs but also to pay off their mortgage as soon as possible,” said a BMO representative in a Financial Post article.
The Bank of Canada in its last statement on interest rates, stated that the long-term goal is to return rates to ‘normalization’. This indicates to us that an increase is coming, since historically we are still experiencing very low rates.
Consumers should stress-test their mortgages: consider higher rates as well as amortization periods. Calculate what would happen if your current mortgage rate rose to 5%, would you still be able to afford it?
If you’re looking for guidance on this subject, by all means feel free to contact us. We’re always happy to answer your questions.