Nearly Half Of All Homeowners Are Concerned About Their Ability To Make Their Mortgage Payments When Interest Rates Rise

Nearly half (47 per cent) of all homeowners with a mortgage agree in that they’re concerned about their ability to make their mortgage payments when interest rates rise, according to a survey conducted by MNP Debt. At the same time, almost a quarter of respondents who perceive the value of their home increasing, said they are less concerned about taking on debt.

Canadians who perceive their home values to be increasing are also 8 points less likely than the national average to be concerned about their debt, 6 points less likely to regret the amount of debt they’ve taken on, and are 8 points less likely to be concerned about interest rates moving them towards bankruptcy.

They also appear to be more cavalier about their spending. One in ten say “because the value of my home has increased, I am becoming more free with my spending.” Fifteen per cent say “with the value of my home continuing to rise, I don’t need to save as much for my retirement.”

Lana Gilbertson, a Vancouver-based government Licensed Insolvency Trustee at MNP Debt, says that the surge in Vancouver home values has prompted a growing number of homeowners to treat their properties like piggy banks.

“Many feel as though they have a lot of equity so they can spend more and use credit to finance their lifestyles. Now the sudden cooling of the market and looking ahead to the possibility of interest rate hikes puts many in potentially disastrous financial situations,” explains Gilbertson.

New mortgage lending rules that go into effect on October 17th will help prevent first-time homebuyers from taking on bigger mortgage than they can afford if and when interest rates go up.

Gilbertson urges those hoping to get pre-approved before new stress test rules come into effect to think twice about taking on more debt without considering the payments at higher interest rates. For those already in the market, Gilbertson advises they start to focus on paying down consumer debt.

“There is a misconception that because interest rates are low, you shouldn’t pay down the debt. Many are tempted to make large purchases before the rates go up. But now may be the best opportunity to focus aggressively on debt repayment,” she says.

About the Survey

The survey was conducted by Ipsos on behalf of MNP Debt between September 6 and September 12, 2016. For this survey, a sample of 1,502 Canadians from Ipsos' online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within +/ - 2.9 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population.