An Ontario man says he’s still considering selling his house, despite this week’s interest rate cut, with his mortgage payments set to leap over $2,000 next month.
“I’m happy to see, finally, a rate cut. I wish it came a lot faster,” Gerry Best, a 66-year-old homeowner in Kitchener, Ont., said.
On Wednesday, the Bank of Canada cut its overnight rate by 25 basis points – a move unseen since before the pandemic.
At the same time, the central bank teased the possibility of further cuts to come, with many economists forecasting that Canada will see another two to three 25 basis point cuts by the end of 2024.
But for Best, it won’t be enough to move the needle before his mortgage renewal on July 17 – just one week before the next interest rate announcement.
The Bank of Canada had previously raised rates 10 times beginning in March 2022 as part of an aggressive hiking campaign made necessary by surging inflation.
“Prior to the Bank of Canada raising the rates, I got caught up in the variable interest nightmare, where it kept on going up and up and up and up,” Best said.
To stay afloat, Best turned to a private lender and is now paying $3,660 per month. But come July, his payments are projected to swell to around $6,000 to $6,500.
To get ahead of what’s to come, Best is planning to put his house on the market by the end of the month and move west to Woodstock, Ont.
Fabian Wills’ mortgage renewal is also an hourglass trickling its last grains of sand. Soon, his time will come, and the 50-year-old homeowner feels like a first time buyer all over again.
“Although it’s going in the right direction, I’m still a little concerned about what do I do – do I do longer term? Do I do a shorter term because it’s going to still keep going down? Or is it going to change and go back up?” he said
Five years ago, the long-time Markham resident moved to Kleinberg in Vaughan, Ont. His daughters were returning home from university and the northbound move created more space for the family. In Kleinberg, Wills fell in love with the access to nature, the walking trails and the community.
While Wednesday’s announcement was a little sigh of relief, he’s already looking ahead to the next one on July 24, before his mortgage payments are expected to increase $2,000 by the end of that month.
Unwilling to uproot his family from their newly settled neighbourhood, they’ll have to cut back on spending – placing a pause on hosting extended family birthdays, going on vacations, and eating out.
“Having this potential barrier hanging over your head is daunting to say the least,” he said.
For Wills, and Canadians alike, the quarter point drop realistically isn’t going to make a massive difference in the short term, Douglas Hoyes, a personal finance expert in Kitchener, said.
“What really matters is what happens next,” he said. “Is this the first of many cuts? That’s what most people expect. If it is then yes, it will bring some relief to borrowers over the coming months.”
Historically looking at the rate cycles, Ron Butler, a Toronto-based mortgage broker, said there’s never been a quarter per cent cut, and then a full stop for a year.
“That’s literally never happened in the history of rates,” Butler said.
Still, Hoyes suggests the safest route is to look at your own personal finances and make decisions based on what you can afford.
“What can you afford to pay? Don’t go $1 over that. That way you don’t have to worry about what happens in the future with interest rates.”
