London, Ont. homeowners prepare as Bank of Canada raises interest rates
Many people who purchased homes in 2018 and 2019 are preparing for a big hit, as they approach renewal dates of mortgages that will see a jump of over double what they first signed up for.
"It's under 3 per cent. So I know it's coming up and I know I'm going to get bitten and I just hope it's not too bad," said homeowner Ryan Cleg, who bought his home in 2019.
The Bank of Canada raised the key interest rate another quarter per cent Wednesday reaching 5 per cent. Mortgage rates are significantly higher than that, sitting in the seven to 10 per cent range, depending on the term.
“There's definitely some concern. It's not just the cost of that mortgage payment going up. You know, everything else is up. And so inflation, you know, has caused groceries to go up, gas to go up," explained Yvette Helwig, a mortgage broker with Dominion Lending.
The reason regulators are continuing to raise the key rate is to try avoid what some economists call entrenched inflation.
"It has to do with the fact that one of the in core inflation that hasn't gone down has been service inflation. And service inflation is mostly a national type of inflation, something that doesn't depend on what happens in the U.S. and the rest of the planet,” said Cristián Bravo, an associate professor at Western University and Canada Research Chair in Banking and Insurance Analytics.
Homeowners like Cleg, approaching a new rate, are preparing new household budgets.
“I'll have to probably look at my overall budget,” he said. “I'll have to make sure that, you know, I know where my money's going and I'm just going to shop around a little bit.”
Helwig counters that factors beyond mortgage payments will force a tightening of the belt.
“So everything is up and, you know, trying to budget and pull back. I find that people really just don't know how to budget very well,” he said. “And the financial literacy, you know, just isn't out there. So I think that's the struggle.”
The worry is these increases will drive the country into a recession before there is relief, according to Bravo.
“What they think is that we're going to have a significant slowdown, but no recession,” he said. “In fact, that's the crucial analysis that they make in their assumptions. They think that growth is going to come down for around three per cent of inflation to one per cent above inflation.”
While most economists believe that will be the end of the increases, they warn not to expect rates to drop for at least six months to a year.
CTVNews.ca Top Stories
![](https://www.ctvnews.ca/polopoly_fs/1.6903244.1716897063!/httpImage/image.jpg_gen/derivatives/landscape_800/image.jpg)
BREAKING Scotiabank suffers direct deposit outage on pay day
Scotiabank has acknowledged technical difficulties affecting direct deposits as clients report missed payments Friday morning. On Friday morning, the bank's client services phone line was playing an automated message assuring customers that work was underway to rectify the outage.
Canada Soccer head investigating 'systemic ethical shortcoming' amid spying scandal
Canada Soccer chief executive officer Kevin Blue said he was investigating a potential 'systemic ethical shortcoming' within the program but has not considered pulling the women's soccer team from the Paris Olympics due to a drone spying scandal.
Suspected train sabotage, bad weather dampen spirits ahead of Paris opening ceremony
The Paris Olympics are getting off to a rough start, with suspected acts of sabotage targeting France's flagship high-speed rail network.
Elon Musk's estranged daughter calls out his 'entirely fake' claims about her childhood
Vivian Jenna Wilson, Elon Musk's estranged daughter, publicly refuted several recent anti-trans statements her Tesla CEO and X owner father has made about her.
At least 4 buildings burned at Jasper Park Lodge, others damaged: Fairmont memo
The Fairmont Jasper Park Lodge said Thursday afternoon most of its structures are "standing and intact," including its iconic main lodge.
'She led it the whole way': 18-year-old B.C. woman leads hikers to safety in Jasper National Park
As fire threatened people in Jasper National Park, Colleen Knull sprung into action.
'Catastrophic' situation 'cannot continue': Open letter from Trudeau, other PMs calling for Gaza ceasefire
Prime ministers of Canada, New Zealand and Australia released a letter renewing calls for an “urgent ceasefire” in Gaza on Friday morning.
Arson attacks cause chaos before start of Olympics in Paris, thwarting athletes' travel
Arsonists attacked the French high-speed rail network early Friday, paralyzing travel to Paris from across the rest of France and Europe for some 800,000 people, including Olympic athletes heading to the grand opening ceremony of the Games in the evening.
Saskatchewan First Nation lifts 17-year long water advisory
After 17 years, residents of Star Blanket Cree Nation can breathe a sigh of relief when turning on their taps.