More than one million homeowners will need to renew their mortgages this year, many of them after locking in very low interest rates during the pandemic.
People who bought homes in 2021 could now face much higher payments. Real estate broker LJ Aguinaga says mortgage rates that were once between 1.5 and 3 per cent are now closer to four per cent.
As a result, monthly payments could rise by about 20 per cent. For a typical $550,000 mortgage, that means paying roughly $550 more each month, or about $6,500 a year.
Aguinaga does not expect many people to be forced to sell their homes, since borrowers were stress-tested at higher rates when they first got their mortgages. Still, families will likely need to cut back on spending, especially as renting is not much cheaper.
Portfolio manager Michael Zagari says some homeowners may reduce savings or extend their mortgage to lower payments. However, he warns that longer mortgages can cost tens of thousands of dollars more in interest and slow down how quickly homeowners pay off what they owe.
