The thought of potentially rising interest rates and the impact on mortgage payments can be overwhelming, but there are ways to manage this anxiety and protect your financial well-being. In this post, we will discuss the current interest rate environment in Canada, the potential impact of rising interest rates on mortgage payments, and five strategies homeowners can use to manage their mortgage anxiety.
Key highlights
- Having a budget in place will help you manage your finances and be prepared for any changes to your mortgage payments.
- Paying down your mortgage faster by making extra payments will help to reduce the impact of rising interest rates on your mortgage payments.
- A fixed-rate mortgage allows you to lock in a specific interest rate for a certain period of time, usually between five and 10 years.
First, it’s important to understand the current interest rate environment in Canada. The Bank of Canada sets the overnight rate, which is the benchmark for other interest rates in the economy, including mortgage rates. For example, if interest rates increase by 0.5%, the monthly mortgage payment on a $400,000 mortgage with a 25-year amortization period would increase by $58. This can be a cause for concern for homeowners in today’s housing market, which is currently cooling as interest rates continue to climb.
To manage mortgage anxiety in a high interest rate environment, there are a few steps homeowners can take:
1. Understand your mortgage and budget
Review your mortgage contract and calculate your current monthly mortgage payment. This will give you a baseline to compare against if interest rates do rise.
2. Create a budget
Having a budget in place will help you manage your finances and be prepared for any changes to your mortgage payments. Make sure to include your mortgage payments, as well as other expenses like groceries, utilities, and entertainment.
3. Make extra payments
Paying down your mortgage faster by making extra payments will help to reduce the impact of rising interest rates on your mortgage payments.
4. Consider a fixed-rate mortgage
A fixed-rate mortgage allows you to lock in a specific interest rate for a certain period of time, usually between five and 10 years.
This means that your mortgage payments will not change, even if interest rates rise.
5. Speak with a financial advisor
If you are feeling overwhelmed, it may be a good idea to speak with a financial advisor. They can help you understand your options and create a plan to manage your mortgage and overall financial well-being.
Final thoughts
Managing mortgage anxiety in a high interest rate environment can be challenging, but by understanding your current mortgage and budget, making extra payments, considering a fixed-rate mortgage and taking the help of financial advisors, homeowners can protect their financial well-being and be prepared for any changes to their mortgage payments. Keep an eye on the announcements made by the Bank of Canada and other financial institutions, which will give you a better understanding of the direction of interest rates and the economy.
Your IG Consultant can advise you on how to integrate your mortgage into your overall financial plan and can also connect you with an IG Mortgage Advisor, who can advise you on the best mortgage option for your circumstances.
If you don’t have one, you can find an IG Consultant here, and you can also contact an IG Mortgage Advisor here.
Published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.
Mortgages are offered by Investors Group Trust Co. Ltd., a federally regulated trust company, and brokered by nesto Inc. Licences: Mortgage Brokerage Ontario #13044, Saskatchewan #316917, New Brunswick #180045101, Nova Scotia #202507230; Mortgage Brokerage Firm Quebec #605058; British Columbia, Alberta, Manitoba, Newfoundland/Labrador, PEI, Yukon, Nunavut, Northwest Territories.
Mortgage advisors are licensed professionals and equivalent to the following titles per province: Sub Mortgage Broker/Mortgage Broker in British Columbia, Mortgage Associate/Mortgage Broker in Alberta, Associate/Mortgage Broker in Saskatchewan, Salesperson/Authorized Official in Manitoba, Mortgage Agent/Mortgage Broker in Ontario, Mortgage Broker in Quebec, Mortgage Associate/Mortgage Broker in New Brunswick, Associate Mortgage Broker/Mortgage Broker in Nova Scotia, or Mortgage Broker in Newfoundland & Labrador.
