Rising interest rates in recent months have started to take a toll on homeowners when it comes to paying their mortgage each month.
Aaron Ruston, a financial advisor with Purposed Financial in Moose Jaw believes people are facing struggles because they have overextended themselves.
“As equity values were going up in their home, they were borrowing on them. They were taking lines of credit,” says Ruston.
Another factor is the variable-rate mortgage that some people may have taken when they bought their home.
“What had happened is those interest rates escalated very quickly...bang, suddenly your monthly payment went from $350 to $650.”
A variable rate mortgage is one that is tied directly to the prime rate (the interest rate banks and lenders use to determine the interest rates for loans, lines of credit, and mortgages) and will fluctuate depending on the prime rate.
Ruston says this type of situation is very evident in Saskatchewan.
“We’re seeing a lot of people that are very stressed with their current debt position because they have jumped in basing their hopes on something that we’ve been spoiled with for quite a number of years – low-interest rates,” adds Ruston. “We’re then caught in an upward surge of seven to eight increases by the Bank of Canada.”
A fixed-rate mortgage is when the interest rate and the monthly payment will stay the same throughout the mortgage term.
The struggles aren’t privy to the younger demographic, as Ruston says that he’s seen people into their 60s and 70s facing mortgage difficulties.
Ruston explains that for those facing mortgage struggles, the best investment you can make is to pay down your debt.
“If there was anything that I would say this is a time when we have to buckle down. We maybe have to get rid of those things that we don’t need. Maybe you don’t need that third or fourth car that you’re making a payment one. Get rid of it and reduce that debt.”
“All that pressure is doing is creating an uncomfortable around your home and in turn often has a greater detrimental impact beyond the fact that you owe money, like family breakdowns.”