{"id":9519,"date":"2018-06-25T11:11:46","date_gmt":"2018-06-25T18:11:46","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=9519"},"modified":"2018-06-19T10:02:09","modified_gmt":"2018-06-19T17:02:09","slug":"the-interest-rates-hikes-could-be-too-much-to-bear-for-many-homeowners","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2018\/06\/the-interest-rates-hikes-could-be-too-much-to-bear-for-many-homeowners\/","title":{"rendered":"The Interest Rates Hikes Could Be Too Much to Bear for Many Homeowners"},"content":{"rendered":"<p style=\"text-align: justify;\">Through most of this decade, Canadians have taken advantage of historically low interest rates and splurged on housing. Except now rates are rising and new regulations are making qualification arduous.<\/p>\n<p style=\"text-align: justify;\">In other words, the honeymoon is over and the hangover has begun.<\/p>\n<p style=\"text-align: justify;\">According to the Bank of Canada, Canadians owe about $1.70 on every after-tax dollar of income they earn annually. It stands to reason, then, that rate hikes could be too much to bear for many homeowners in this country.<\/p>\n<p style=\"text-align: justify;\">According to Neville Joanes, chief investment officer at WealthBar, that would be deleterious to the housing market.<\/p>\n<p style=\"text-align: justify;\">\u201cIf interest rates increase and individuals are not able to service their debt, it will lead to an increase in supply over sales and foreclosures, and that will lead to a decrease in the housing market from a residential perspective because supply will increase,\u201d he said.<\/p>\n<p style=\"text-align: justify;\">He also believes that homeowners with significant home equity or mortgage insurance would enjoy a measure of protection.<\/p>\n<p style=\"text-align: justify;\">However, should things go awry in the housing market\u2014In April, home values plunged 11.3% from a year earlier, according to Canadian Real Estate Association statistics\u2014banks would reduce what they\u2019re willing to lend against equity. Moreover, in a rising rate environment, borrowers attempting to refinance or access home equity to service household debt may find those options restricted.<\/p>\n<p style=\"text-align: justify;\">\u201cSelling may be their only solution,\u201d said Joanes. \u201cFor an individual with a high level of consumer debt who\u2019s unable to access the equity in their home and unable to meet their payment obligations, the only way to access equity may be to help refinance their personal circumstances or reduce their personal debt load. There are debt management services out there that help individuals reduce levels of high household debt.\u201d<\/p>\n<p style=\"text-align: justify;\">But Rakhi Madan, a Dominion Lending Centres Key Mortgage Partners broker, says household debt concerns are overblown in no small part because the Bank of Canada omitted a salient distinction.<\/p>\n<p style=\"text-align: justify;\">\u201cWhat the Bank of Canada is not addressing is how much of that $1.70 is unsecured and how much of it is from mortgages,\u201d she said. \u201cSecured debts you can get rid of. It\u2019s an asset you\u2019re holding. Every payment you make on a mortgage, depending on your interest rate, half is coming back to the equity in your house. You can sell secure debt but unsecured you pay from your income. That $1.70 is pretty nominal, so that\u2019s why I feel like this is overblown.\u201d<\/p>\n<p style=\"text-align: justify;\">The ramifications of household debt levels, exorbitant as they may be, will likely remain shielded by steady housing appreciation.<\/p>\n<p style=\"text-align: justify;\">\u201cI don\u2019t think Canada is headed for a housing-led recession simply because, even though household debt is high, housing prices are high and cities are transforming,\u201d said Joanes. \u201cIf you compare major metropolitan hubs in Canada to those in the U.S. and those in Europe, they\u2019re still not priced to that level and there\u2019s still space for price appreciation in major Canadian cities.\u201d<\/p>\n<p><a href=\"https:\/\/www.mortgagebrokernews.ca\/news\/honeymoon-over-for-homeowners-243871.aspx?platform=hootsuite\" target=\"_blank\" rel=\"noopener\">Honeymoon Over for Homeowners<\/a> by Neil Sharma | Mortgage Broker News<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Through most of this decade, Canadians have taken advantage of historically low interest rates and splurged on housing. Except now rates are rising and new regulations are making qualification arduous. &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2018\/06\/the-interest-rates-hikes-could-be-too-much-to-bear-for-many-homeowners\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-9519","post","type-post","status-publish","format-standard","hentry","category-mortgage"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Interest Rates Hikes Could Be Too Much to Bear for Many Homeowners &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2018\/06\/the-interest-rates-hikes-could-be-too-much-to-bear-for-many-homeowners\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"The Interest Rates Hikes Could Be Too Much to Bear for Many Homeowners &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Through most of this decade, Canadians have taken advantage of historically low interest rates and splurged on housing. 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