Quote:
Originally Posted by bluejays
I'm not economist but why were people so concerned about x amount of the population having their mortgages coming up for renewal at today's higher rates? When let's say, 40% of the population has experienced the higher rates and have effectively coped, it's fair to say the same should be fine for the remaining 60% (who are going to be experiencing that higher rate), no? I don't understand how this specific part of the population is factoring into the rate cut decision.
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They don't really factor into rate decisions, other than the Bank of Canada considering the drop in demand that the higher mortgage rates will lead to.
But in terms of why people are concerned for the renewals in the near future, it's because the disparity between the old and new rates will increase. Until the last 2 years, the majority of fixed rate mortgages were 5-year terms which means most of the fixed mortgage renewals that have happened were originated in 2018 and 2019, when fixed rates were 3-3.5%. I'm an example of that where my rate from 2018 wasn't much lower than my rate in 2023; I think my mortgage payment went up maybe 7-8%. But once we get into 2025 and 2026, people coming off 5-year loans will be renewing from 1.5-2% rates they got in 2020 and 2021. If rates stay at their current level, that represents more like a 40-50% increase in payments.