Most own­ers un­pre­pared for rate hike: sur­vey

The Hamilton Spectator - - BUSINESS - LINDA NGUYEN

TORONTO — Nearly three quar­ters of Cana­dian home­own­ers say they would have dif­fi­culty pay­ing their mort­gage if their pay­ments were to in­crease by more than 10 per cent, says a new sur­vey by Man­ulife Bank.

Thirty-eight per cent of those polled say their mort­gage bills could rise be­tween one to five per cent be­fore they would have fi­nan­cial dif­fi­culty; 20 per cent say they could sus­tain an in­crease in pay­ments be­tween six to 10 per cent be­fore hav­ing trou­ble; and 14 per cent say any hike would be a prob­lem.

Twenty-two per cent said they could han­dle a pay­ment in­crease of be­tween 11 to 30 per cent, while the re­main­ing seven per cent didn’t know or were un­sure.

“What th­ese peo­ple don’t re­al­ize is that we’re at record low in­ter­est rates today,” said Rick Lunny, pres­i­dent and CEO of Man­ulife Bank, ad­ding that a 10 per cent in­crease in mort­gage pay­ments could be the re­sult of as lit­tle as a one per cent in­ter­est hike.

“When you put it into that con­text, they’re not re­ally pre­pared for what is in­evitable. Sooner or later, in­ter­est rates are go­ing to rise.”

The sur­vey found that 45 per cent of mil­len­nial home­own­ers — those aged be­tween 20 to 35 — would have the most dif­fi­culty mak­ing their mort­gage pay­ment within three months or less if the pri­mary in­come-earner in their fam­i­lies were to sud­denly be­come un­em­ployed.

Mil­len­ni­als were also the group that on av­er­age had the high­est amount of out­stand­ing mort­gage debt, at $223,000, while Gen X-ers (those aged 36 to 52) had an av­er­age of $202,000 owing. Baby boomers (ages 53 to 70) had $180,000.

Lunny said many mil­len­ni­als are un­pre­pared to deal with a fi­nan­cial emer­gency due to a lack of fi­nan­cial lit­er­acy and soar­ing amounts of debt. That group has seen their mort­gage debt rise more than any other gen­er­a­tion, ac­cord­ing to the sur­vey.

The sur­vey was con­ducted on­line in English and French from Feb. 1 to 14. It polled 2,098 home­own­ers be­tween the ages of 20 to 69 with house­hold in­comes of $50,000 or higher.

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