Tag Archives: bmo bank of montreal
It is an interesting time in the mortgage industry – with the impending changes of Jim Flaherty’s mortgage lending restrictions– as well as expected eventual hike in interest rates. There is much focus been put on the question– can Canadian mortgage holders weather this brewing storm?
According to a recent survey done by BMO Bank of Montreal, most homeowners feel confident that they will still be able to manage their mortgage obligations if and when interest rates rise; one fifth of those surveyed do not have the same confidence.
According to BMO, “a typical new home buyer uses just over one third of their average household disposable income to service their mortgage today, in line with historical norms. “
“Total housing expenses should not consume more than one third of total household income,” says Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. “However, it is still important to be prudent and stress-test your mortgage against a higher interest rate to ensure you can afford what you signed up for.”
Jeffrey Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada, Inc, urges even more caution in the face of uncertainty.” Mortgage payments shouldn’t exceed 25% of income, which is hard sometimes, in some centres.”
The current appearance of affordability should not be taken for granted, and Canadians are encouraged to “stress test” their mortgage, to make sure that their debt load is manageable – and could withstand higher payments.
BMO Economics “forecasts that the Bank of Canada will raise interest rates by 1% point before the year-end.”
“Despite high prices, housing remains reasonably affordable due to record low interest rates,” said Sal Guatieri, BMO Economics. “That said, Canadians should prepare for interest rates to eventually return to historic norms.
BMO suggests several ways to develop a strategy to attack potential mortgage debt management problems before they start.
Choose a fixed rate over a variable rate; rates are still low right now, and it makes sense to take advantage when the sense is that they will only go up; don’t forget about other housing costs (taxes, utilities, etc.) that are in addition to mortgage payments, and include them in your monthly budgeting; for first time homebuyers– increase your down payment—which will effectively lower your payments.
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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