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 cost1
Additional
yearly cost1
$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.


*Source: Posted Historical 5-Year Fixed Mortgage Rates. RateHub Inc.
**Source: Mortgage Rate History. The Mortgage Group.
1 Compared to 2.75%.
The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.
©2018 AGF Management Limited. All rights reserved. Visit https://perspectives.agf.com

More articles like this.

What happens to unused RESP money?

Back to School series: You have options if the beneficiary doesn’t pursue a post-secondary education.

Read More

6 Tips to Teach Your Kids About Money

Back to school series: Practical tips for teaching financial literacy.

Read More

Is your home your retirement plan?

Real Estate Investing series: What are the potential risks of using your home to fund your retirement?

Read More