Interest rate hike another blow to BC homeowners stretched thin |  CBC News

Interest rate hike another blow to BC homeowners stretched thin | CBC News

When Alex Tappin woke up Wednesday, he found his monthly mortgage payments would increase by an additional $250.

It’s the latest increase for a recent North Vancouver homebuyer who watched his monthly bill rise 40 per cent over the past year after signing up for an adjustable-rate mortgage.

“It’s scary,” Tappin, who is also a real estate agent, told CBC News. “We decided to go variable and until today it was the right move. This is a day where our variable payments are higher than what we could have had for fixed.”

Tappin is one of many homeowners in BC who have seen interest rates skyrocket as the Bank of Canada continues to raise its key rate to combat runaway inflation.

On Wednesday, rates were raised again from 3.25 percent to 3.75 percent. After cutting its interest rate to near zero at the start of the pandemic, the bank has raised its benchmark rate six times since March as it struggles to contain inflation, which is at its highest level in decades.

The central bank rate affects the rates Canadian consumers and businesses get from their own banks on things like mortgages, lines of credit and savings accounts.

For homeowners like Tappin, the increase means tougher decisions about spending and where to cut costs.

“We’re just tightening our belts,” he said. “We’ve stopped dining out, we’ve started shopping on sale, clipping coupons … we’ve stopped investing in our kids’ RESPs, we’ve stopped all RRSP contributions, and we’re just really trying our best to make ends meet.”

Vancouver’s skyline is pictured from North Vancouver, British Columbia on Wednesday, Oct. 26, 2022. (Ben Nelms/CBC)

More hikes are expected

McKay Wood, a Vancouver-based mortgage broker, said he expects two to three more rate hikes over the next year, leading to difficult decisions for those in a similar strait.

“The advice is, do you wait? Or do you lock in now and realize that rates could come down a little bit in the next six months to a year when inflation is under control,” he said. “It’s a compromise.

The central bank’s 50 basis point hike is less than the 75 basis points some economists and investors had expected, but it made clear in its statement that more rate hikes are on the table and that rates “will have to rise further.” .”

With inflation down to 6.9 percent from a peak of 8.1, Wood says there are signs of an economic slowdown.

“We don’t know where they will go, but we know their end is in sight,” he said. “The Bank of Canada has said we will do everything we can to get inflation under control.”

“Breathe, be patient and realize this is a storm that will pass,” he said.

A now sold banner on a new condo tower in downtown Vancouver, British Columbia on Thursday, January 27, 2022. (Ben Nelms/CBC)

It calls for transparency

Tappin acknowledges that while his situation is difficult, the plight of many homebuyers is much more difficult, including some of his clients who are also exhausted after signing up for variable mortgages.

“Many lenders don’t take the time to explain the real risks to buyers,” he said. “They’re not doing that and they’re just pushing people into mortgages.”

“The banks, their profits this year are going to be crazy, and they’re going to make it off our backs,” he added.

He says he advises potential buyers to wait until rates drop to buy a home.

“It’s our job as estate agents and mortgage lenders to explain the risk and not push people into buying the biggest house they can. It’s not responsible and we owe it to our clients to explain the risks.”

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