March 27, 2023

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 another $250.

It’s the latest uptick for a recent North Vancouver homebuyer who has seen his monthly bill jump 40 per cent in the past year since 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 fees are higher than we could have been with fixed.”

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

On Wednesday, interest rates were raised again from 3.25% to 3.75%. After lowering its lending rate to close to zero at the start of the pandemic, the bank has raised its benchmark rate six times since March as it tries to curb inflation, which is at its highest level in decades.

The central bank rate affects the interest rates that Canadian consumers and businesses receive 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 cutting costs.

“We’re just tightening our belts,” he said. “We stopped eating out, we started discount shopping, we started clipping coupons… we stopped investing in our kids’ RESPs, we stopped contributing everything to our RRSPs, and we’re just really trying our best to make ends meet.”

The Vancouver city skyline is photographed from North Vancouver, British Columbia on Wednesday, October 26, 2022. (Ben Nelms/CBC)

More hikes to come

McKay Wood, a Vancouver-based mortgage broker, said he expects there could be another two to three more rate hikes in the next two to three years, leading to tough decisions for those in a similar situation.

“The advice is, do you wait? Or do you read now, realizing that interest rates may come down a little over the next six months or a year when inflation is under control,” he said. “It’s a barter.”

The central bank’s 50 basis point hike is less than the 75 basis points some economists and investors were expecting, but in a statement it made clear that more rate hikes are on the table and that rates “must rise further.”

With inflation slowing to about 6.9 percent from a high of 8.1, Wood says there are signs the economy is slowing.

“We don’t know where they’re going, but we know the end is in sight,” he said. “The Bank of Canada has said we are doing everything we can to get inflation under control.”

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

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

Transparency is required

Tappin admits that while his situation is difficult, the plight of many homebuyers is much more difficult, including some of his clients, who have also been downgraded after signing variable rate 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 forcing people to take out mortgages.”

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

He says he advises potential buyers to wait until prices drop before buying a home.

“As both real estate agents and mortgage lenders, it’s our job to explain the risks and not push people into buying the biggest home possible. That’s not responsible, and we owe it to our customers to explain the risks.”

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