The impact of an interest-rate rise on homeowners

May 15, 2018

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The content in the below article is meant for Canadian investors only.

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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.

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The 5-year fixed-term mortgage rate was 7% in 2008.
Could it happen again?

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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.

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Talk to your Financial Advisor about how an interest-rate hike will impact your monthly budget and your financial plan.

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*Source: Posted Historical 5-Year Fixed Mortgage Rates. RateHub Inc.
**Source: Mortgage Rate History. The Mortgage Group.
¹ Compared to 2.75%.

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