The impact of an interest-rate rise on homeowners
Author: Sound Choices
May 15, 2018
The content in the below article is meant for Canadian investors only.
Nearly half of all Canadian mortgages are up for renewal this year – these homeowners are now facing the impact of several interest-rate hikes over the last year.
The 5-year fixed-term mortgage rate was 7% in 2008.
Could it happen again?
How much will a mortgage payment go up?
Assuming a 25-year amortization period, we’ve looked at three interest rates and mortgages representing typical housing prices across the country:
- 2.75% = competitive 5-year fixed mortgage rate (May 2013)*
- 3.25% = best rate today (May 2018)**
- 5.50% = bank’s posted rates today (May 2018)**
| Mortgage rate | Monthly payment | Additional monthly cost 1 | Additional yearly cost 1 |
|
| $300,000 mortgage | 2.75% | $1,381.53 | — | — |
| 3.25% | $1,458.50 | $76.97 | $923.64 |
|
| 5.50% | $1,831.17 | $449.64 | $5,395.68 |
|
| $500,000 mortgage | 2.75% | $2,239.83 | — | — |
| 3.25% | $2,430.83 | $128.27 | $1,539.24 |
|
| 5.50% | $3,051.96 | $749.40 | $8,992.80 |
|
| $1,000,000 mortgage | 2.75% | $4,605.11 | — | — |
| 3.25% | $4,861.66 | $256.55 | $3,078.60 | |
| 5.50% | $6,103.91 | $1,498.80 | $17,985.60 |
Even though the interest-rate increase may not seem high, this can translate into a significant difference to your monthly budget – especially over a one-year period or the life of the mortgage.
Talk to your Financial Advisor about how an interest-rate hike will impact your monthly budget and your financial plan.
