Most Not Ready For Rate Hike
Survey finds 16% couldn't pay $500 more in mortgage
Nearly one in six Canadians would not be able to handle a $500 increase in their monthly mortgage payments, a new survey from the Bank of Montreal suggests.
According to the bank, 16% of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27%, would need to review their budget.
Another 26% said they would be concerned but could probably handle it. Such an increase would be generated in the case of a 3% point hike in interest rates - from 2.75% to 5.75% - on a $300,000 mortgage with a 25 year amortization period.
The report by BMO's Wealth Institute found that almost half of Canadians, 47% believed that the high level of debt in Canada has been influenced by soaring real estate values, while 40% believed it has been influenced by low rates.
BMO noted that when interest rates are low, it is a good time to make aggressive principal repayments on loans. Its survey found that 35% of respondents are looking to pay down their mortgage sooner.
"However, statistics have shown that debt service rates have not changed very much from the early 1990's, when interest rates were much higher," the report said.
"It appears that many Canadians have used low interest rates to get larger loans on more expensive houses rather than to aggressively repay their debt."
Source Metronews -Business -Wed October 7, 2015
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