The increase in the base rate puts at risk the economy of many property owners, many of whom in Quebec are multiplying their repayment strategies.
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One of the best ways to deal with a sudden increase in mortgage payments is to delay paying off the mortgage.
“But currently, if we look at RBC [Banque Royale du Canada] and T.D [Canada Trust]“Currently, 23% of mortgage loans with these two lenders have a remaining amortization period of more than 35 years,” explains Les Architectes Hypothécaires mortgage broker Stéphane Bruyère in the 100% Nouvelles program.
So with these two big banks, it’s one in four people who, “when they look at the mortgage loans on their bank statements, have more than 35 years until they pay off their mortgage,” adds Mr. Bruyère.
According to the mortgage broker, it is an unprecedented situation to see so many owners in such an extreme payback situation.
“financial slaves”
The rise in interest rates is also exacerbated by the overbidding of real estate in recent years, a situation that Bruyère says will not improve.
“CMHC [Société canadienne d’hypothèques et de logement]Furthermore, it was said this week that we should see prices rise by 89% within six years. So if we assume that we will no longer see tariff and price increases, in reality there is no one who is delinquent, no one who is in arrears, and so it goes on, he explains.
According to the mortgage broker, the situation is beneficial for those who are already owners, but disastrous for those who want to gain access to a property.
“We are really creating two social classes. If you want to become a millionaire, it’s easy: you just have to have a house. If you are not an owner, you are financial slaves,” he laments.
However, many owners with fixed rates will soon need to renew their contracts, unfortunately resulting in their rates doubling or in some cases even tripling.
“That’s about two-thirds of mortgage loans [qui sont dans cette situation]. Because when we arrived in 2020, interest rates fell and several people decided to renegotiate their mortgage loan and take a fixed term of 5 years, so there are many mortgage loans that expire in 2025, 2026,” explains the expert.
This situation, which will create great financial uncertainty, requires significant capital from major Canadian banks, while obtaining liquidity is already a problem.
“The banks, if things are not going well, the government will support them […]. If the CMHC defaults or the Canadian banks… the one who pays is always the same: you and me,” recalls Mr. Bruyère.