PUBLISHED JULY 21, 2023 UPDATED JULY 22, 2023
With the Bank of Canada’s latest interest rate hike in July, life keeps getting more expensive for those with a mortgage.
Angela Calla, mortgage broker at Dominion Lending Centres in Vancouver, notes that regardless of income level, having to qualify at interest rates that are 4 or 5 percentage points higher than when a homeowner first got their mortgage is certainly a pressure cooker. She recently shared her thoughts with Globe Advisor on strategies for how her clients are coping.
What things do you advise clients to consider at mortgage renewal time?
With another hike looming in the fall, anybody who has a renewal upcoming in the next year shouldn’t wait to secure a rate to protect themselves and minimize their payment shock.
They also need to consider if they want to move up the property ladder in the future or have outside debts. The mortgage renewal is the optimal time to review your options because there’s no penalty.
If they live in a strata property, they want to make sure that they have no assessments coming up. It’s essential for them to take out the money to have in an emergency fund for that. We’re seeing a lot of people getting hit with assessments on their condos for certain items such as roofs. That can be detrimental to people on a fixed income in these high inflationary times and even at the best of times. If they need to break their mortgage down the road, then they’re looking at a penalty. In the middle of an assessment, lenders don’t look at these properties favourably.
What are your clients doing to manage the rate increases?
Some people who are experiencing the largest increases are using a reverse mortgage. They’re getting these because they don’t want to take their money out of investments and pay taxes on them. They already feel like they may not be prepared for retirement with the increase in inflation. It’s been common for them to take a three- or five-year term to help things as they settle.
Some are putting their emergency funds in a high-interest saving account paying more than 5 per cent. So, instead of paying property taxes with their mortgage or pre-paying their mortgage, they’re putting those funds aside in their emergency funds.
Some are extending their amortization to give them some time until rates come back down. Some want to sell and rent but the problem is there’s no product to rent.
What’s your overall outlook that you share with clients who are finding it tough to cope?
I tell my clients that anything they do right now is specific to this time in the market and specific financial circumstances. It can always be modified and changed when other things change down the road.
This interview has been edited and condensed. This is Globe Advisor’s weekly newsletter for professional financial advisors, published every Friday.
– Deanne Gage, Globe Advisor reporter
Angela Calla is an 19-year award-winning woman of influence which sets her apart from the rest. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages. In light of this, her success awarded her with the 2020Business Leader of the Year Award.
Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.
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