Homeowners in Kamloops who are in variable rate mortgage may be paying up to $1,000 more after six rate increases this year by the Bank of Canada (Image Credit: CFJC Today)

By Chad Klassen

BANK OF CANADA

Kamloops homeowners with variable rate mortgages to pay more after latest interest rate increase

Oct 26, 2022 | 4:42 PM

KAMLOOPS — From interest rates at 1.45 per cent in March to now 4.95 per cent after the latest increase from the Bank of Canada, Kamloops homeowners who are in a variable rate mortgage will see another jump in their monthly bills.

“It’s a different rate environment than we’ve ever been in,” noted mortgage broker Travis Colman from Colman & Associates. “Rates have consistently been pretty low. The market has been increasing year over year over year since 2015, so this is the first time in a decade essentially that we’re seeing rising rates and a contraction in the market.”

On Wednesday, the Bank of Canada increased the benchmark rate by a half a percentage to 3.75 per cent in an effort to calm inflation.

Colman says for someone who has a $500,000 mortgage, they are paying nearly $1,000 more per month than they were in March — from monthly payments of just under $2,000 to nearly $2,900 with Wednesday’s rate increase.

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“It’s like taking on an exceptional vehicle payment, that’s for sure,” said Colman. “And that’s what the stress test was designed to be in place for, right? So when you were getting, a good variable rate was 1.4 per cent, so when you’re stress-testing that mortgage to the benchmark rate, it was meant to give you all that buffer room. That’s really where we’re at today.”

The rising interest rates has the Kamloops and District real estate market recording its slowest third quarter since 2011. Even just compared to last year, activity is down 39 per cent with 555 home sales worth $331 million.

“What’s happening is that [interest rates are] cutting buyers’ purchasing power,” said Kamloops realtor Sarah Johnstone. “So a number of buyers have essentially been forced out of the market simply because they’re not able to afford mortgages right now.”

On the flip side, buyers who were caught up in a hot market earlier this year and lost out on multiple-bid offers can now more easily purchase a home, which are sitting on the market for much longer.

“Earlier in the year, we were certainly seeing homes hit the market and within a few days there would be an accepted offer on that property,” noted Johnstone. “Now in September 2022, the average days on market was around 50 days.”

It’s the sixth interest rate increase since March, and Johnstone says only a quarter of your mortgage payment now is going towards your principle compared to half last October.

Colman says the rising mortgage payments may force some from their home.

“Unfortunately that’s going to be the reality for a small percentage of people,” he said. “I think if it’s coming to that, people should be aware that their lenders are cognizant of the situation as well. It’s a good time to be back in touch with your broker or with your representative at your branch or bank or wherever you get your mortgage from.”