When interest rates rise, so does our blood pressure. Let's take a deeper look at what increased rates actually look like:
$400,000 total amount owing
6% interest rate
=$2,559.23 mortgage payment
$400,000 total amount owing
7% interest rate
=$2,801.66 mortgage payment
*this is a $242.43/month increase
$400,000 total amount owing
8% interest rate
=$3,052.85 mortgage payment
*this is a $251.19/month increase
While none of us want to pay more at our upcoming mortgage renewal, we can still afford our homes. Many folks are still purchasing homes, as Canadian real estate has shown to consistently increase in value. Remember that paying rent is paying 100% interest. 100% interest is a lot more than our current 5% interest rates.
It's important to know that every mortgage application is rigorously stress-tested. This means that every approved mortgage applicant has shown they are overqualified for their current mortgage at current interest rates. Don't let the news scare you - talk to a mortgage professional before ruling out purchasing a home in today's market.