As expected, the Bank of Canada has increased its key lending rate by half to one percent – the largest increase in more than two decades.
The bank said Russia’s invasion of Ukraine would increase inflation longer than expected.
Nolan Smith, owner of Oceanvale Mortgage and Finance, told CTV News that people may be worried about their mortgage payments because of what they are learning online.
“I think people are very scared now about inflation because we have a lot of housing debt now, you know, housing prices are going crazy, and debt is getting bigger,” Smith said.
Part of the concern, he added, is that most people are spending 2.45 percent as a major loan amount.
“It’s just crazy,” he said. “You know, back in ’08 it was six percent. You know, it was just (percent) and four percent lower. ”
Asked about inflation, Finance Minister Chrystia Freeland said financial management was in place to ensure that loans did not go under water.
“We have a pressure test designed to make sure that anyone who borrows money can go through a period of high interest rates,” Freeland said.
Those who want to buy a home may find that things get worse before they get better as some buyers are looking to lock down lower prices from pre-authorization.
Bryan Yu, a senior economist for Central One Credit Union, said he and others were expecting higher inflation later this year.
“(At that time) a lot of these rates will no longer be available to these buyers. So I think that’s where we see inflation, ”he said.
Yu also indicated that homeowners would be eligible for smaller loans. This comes as real estate prices, for many, are already unaffordable.
“I would not be surprised again, given the increase in housing prices during the violence, that some markets may see a 5 to 10 percent decline due to over-buying at the beginning of this. year, ”added Yu.
Smith said some customers prefer to switch to a loan with a fixed price, which is usually higher, to lower cost. But that may not work for everyone. His advice to borrowers is just relax.
“I believe a quarterly increase in the principal amount, increases your payout only 12 dollars per century.”
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