Those home owners will experience a big increase in costs when those loans are due for renewal in four to five years, Tal said. That’s not the case for new pandemic-era mortgages, which currently carry much lower rates.
For many of these borrowers, coming rate hikes won’t translate into higher payments. Most mortgages in Canada are for five-year terms, meaning loans that are being repriced over the next couple of years were set in 20 when interest rates were higher. His conclusion: people who raced into the market during the coronavirus crisis to take advantage of historically low borrowing costs may face the greatest pressure.
With the Bank of Canada expected to raise interest rates sharply, economist Benjamin Tal at Canadian Imperial Bank of Commerce released a report on Thursday that looked at which Canadians could face the biggest price shock from higher borrowing costs. Canadians who took on new mortgages during the pandemic will be the hardest hit by rising interest rates, though most of the pain won’t be felt for at least another four years.
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