FILE PHOTO: Real estate sings in TorontoTORONTO - Highly indebted Canadians hoping for relief from a rapid rise in mortgage rates are in for some disappointment, as recent moves in the bond market point to interest rates staying at elevated levels for longer than previously expected due to stubborn inflation.
It means that when roughly 20% of Canadian mortgages come up for renewal in the next year, it will likely put many borrowers in a tougher financial spot than they could have expected just a few months ago. Mortgage rates tend to track moves in the bond market with a lag. When it is time for renewal, options for homeowners hoping to shop for better interest rates might be limited as they would have to re-qualify for the stress test at the latest interest rates with their new lender.Canada amended its stress test rules in 2021 requiring borrowers to prove they can handle mortgage repayment 200 basis points above their contracted rate and will have to re-qualify if moving to a different lender at the time of renewal.
Daniel Foch, director of economic research at Toronto-based RARE Real Estate, pointed to Toronto Regional Real Estate Board data that showed power of sale - a clause that allows lenders to sell a borrower's property if they default on mortgage payments - had risen in the recent months.
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