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September 9, 2022 | Mortgage Stress is International Saga

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Recent Canadian mortgage data compiled by the Bank of Montreal gives a glimpse at the rate of change afoot for many Canadian property owners:

  • Some 20% of all Canadian mortgages outstanding ($260 billion) are variable rate loans taken out near the interest lows at 1.5% into February 2022. With rates on offer now closer to 5%, many existing payments are insufficient to cover interest costs (never mind reduce principal) and will trigger the need for increased payments, lump sum deposits and/or longer amortization periods to keep the loans in good standing.
  • An additional $130 billion fixed rate mortgages were taken out over a 12-month period five years ago at prevailing rates in the low 3% range that will be coming up from renewal over the next 12 months at much higher rates.
  • Some $160 billion of secured personal loans (HELOCs) were taken out near cycle lows into February 2022, and those rates have moved 300bps higher since, doubling the minimum payments needed.

Mortgage stress is now a number-one issue raised in political focus groups and surveys, particularly in the counties that experienced the biggest housing debt bubbles over the last decade.

The Reserve Bank of Australia has raised the cash rate for a fifth consecutive month. In the economic data, there are small signs the rate hikes are starting to take effect but it’s being acutely felt by mortgagees especially those riding out variable rates.

It’s fine now for the record number of Australians with fixed rate loans but by the middle of next year, they’ll be in for a nasty surprise. Ashlynne McGhee reports.Here is a direct video link.

Mortgage prison…

As banks impose tougher lending standards and interest rate hikes drive property prices down, more Australians who borrowed at the height of the pandemic housing boom will find themselves in a mortgage trap, unable to refinance their home loans. Here is a direct video link.

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September 9th, 2022

Posted In: Juggling Dynamite

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