And prospective buyers are cutting spending to afford a home
Millions of Canadian homeowners are weighing the cost of their mortgage with renewals ahead.
A new report from TD Bank Group shows that financial uncertainty and housing affordability are the main concerns of survey respondents, and among those with mortgage renewals in the next 12 months 45% are expecting to pay more every month than currently with 57% predicting an impact on their living situation.
Despite the Bank of Canada deciding to hold interest rates at 2.75% this week, borrowing rates have come down in the past year, but are still elevated compared to the decade of low rates that ended in 2022.
The cost of higher mortgages looks set to force some radical moves – literally – for some Canadians as 29% say they will need to sell their home and buy a more affordable one, or downsize, 15% will move to a cheaper neighbourhood, and a further 15% will consider moving in with a roommate.
"While our survey found that 75% of those preparing to renew their mortgage this year are leaning towards a fixed instead of a variable rate mortgage, it's important to remember that there isn't a one-size-fits-all approach to choosing what will work for you," said Patrick Smith, Vice President, Product Management, Real Estate Secured Lending at TD.
Meanwhile, those who are yet to buy a home are considering how they can cut other expenses to be able to afford to buy.
This includes 55% who are cutting back on non-essential expenses along with 31% who are planning on cashing in their current investments, such as Tax Free Savings Accounts, Registered Retirement Savings Plans, and First Home Savings Accounts.
The survey reveals how challenging the homebuying process can be with many respondents citing stress (45%) and anxiety (38%) although they also expressed feelings of excitement (34%), hopefulness (33%), and optimism (32%).
