Many variable mortgage holders could experience payment shock, as rate hikes push their monthly payments past the trigger rate threshold.
七月 BoC 加息 0.75% 后，分析师 Ben Rabidoux 估计加拿大将有 75 万宗房屋按揭接近 trigger rate，占所有房屋按揭的 15%。
名词解释【 trigger rate 】
当按揭利率升高到一定程度时，目前的每月还款金额 100% 偿还利息，甚至还不够。
1. Lump sum 一笔还款，把总借款金额降下来；
3. 拉长还款期限 (超过trigger rate太多时是无效的)
The vast majority of variable-rate mortgages have fixed monthly payments, but soaring interest rates mean many of them will likely hit their “trigger rates” this fall, forcing an increase in payments.
Around 15% of the mortgages in Canada are in this group, according to an estimate from Ben Rabidoux, a prominent housing market analyst. That amounts to around 750,000 mortgages.
A “trigger rate” is the point at which interest payments eat up all of a monthly mortgage payment, and the borrower is no longer paying down the principal they borrowed — something that’s not allowed under Canadian lending rules.
This means borrowers will be contacted by their lender and, typically, given the option to either increase their monthly payment, or make a lump sum payment against their mortgage to lower the amount owing.
Depending on their mortgage, borrowers may also have the option to switch to a fixed-rate mortgage – though Rabidoux and others warn there’s a chance borrowers could end up locking themselves in at unnecessarily high rates.
Canadians took out $260B-worth of variable-rate mortgages between March 2021 and February 2022, at a rock-bottom average interest rate of 1.58%, Rabidoux noted in a Twitter thread.
The “average” of these mortgages will hit their trigger rate if the Bank of Canada (BoC) raises its key lending rate by just one more percentage point, or 100 basis points in the language of the financial industry, said Rabidoux, founder of North Cove Advisors and Edge Realty Analytics.
<--- 实际上九月升息 0.75%，而不是 1%
The BoC has already raised its rate four times this year, taking it from 0.25% to 2.5% in the fastest pace of rate hikes in three decades. That has increased the interest portion of variable-rate borrowers’ monthly payments, but so far, few loans have hit their trigger rates, and monthly payments have remained steady.
The bond markets are pricing in a 75-basis-point rate hike when the BoC announces its policy interest rate on Sept. 7, but many think it could hike a full 100 basis points, as it did in July.
An increase in mortgage payments could put further pressure on the consumer economy, with shoppers already cutting back due to rising prices.
Royal Bank of Canada, which says it has about 80,000 mortgages that will hit their trigger rate with the next few rate hikes, expects the average payment increase to be around $200 per month.
Rabidoux noted that these borrowers all passed the mortgage stress test, which last year would have required them to qualify for a loan at a hypothetical rate of 5.25%.
“Most borrowers will be fine, but not all,” he said in an email exchange with STOREYS.