Interest rate hike another blow to B.C. homeowners stretched thin

When Alex Tappinwoke up on Wednesday, he discovered his monthly mortgage payments would be going up by yet another $250.

It's the latest hike forthe recent North Vancouver homebuyerwho has watched his monthly bill grow by 40 per cent over the past year after signing on to a variable rate mortgage.

"It's scary," Tappin, who is also a Realtor, told CBC News. "We decided to go variable,and until today, that was the right move. This is the day our variable payments are higher than what we could have had for fixed."

Tappinis among many B.C. homeowners who have seen their interest rates skyrocket as the Bank of Canada continues to hikeits key rate to fight runaway inflation.

On Wednesday, rates were once again increased from 3.25 per cent to 3.75per cent.After slashing its lending rate to near zero early in the pandemic, the bank has raised its benchmark rate six times since March as it scrambles to rein in inflation, which isat its highest level in decades.

The central bank's rate affects the rates that Canadian consumers and businesses get from their own banks on things like mortgages, lines of credit and savings accounts.

For homeowners like Tappin, the increase means more difficult decisions when it comes to spending and where to cut costs.

"We're just tightening the belt," he said. "We stopped dining out, started sale shopping, coupon clipping ... we stopped investing in our kids'RESPs, stopped all RRSP contributions, and are just really trying our best to make ends meet."

Further hikes expected

McKay Wood, a Vancouver-based mortgage broker, said he expects there could be another two to three rate increases over the next year, leading to difficult decisions to be made for those in similar straits.

"The advice is, do you wait? Or do you lock in now, realizing that the rates could come down a little bit in the next sixmonths to a year when inflation is in check," he said. "It's a trade-off."

The central bank's increase of 50 basis points is less than the 75 points that some economists and investors were anticipating,but in a statement, it made itclear that more rate hikes are very much on the table andthat rates "will need to rise further."

With inflation down to about 6.9 per cent from a high of 8.1, Wood says there are signs of an economic slowdown.

"We don't know where they're going to go, but we do know there's an end in sight," he said."The Bank of Canada has said we're going to do whatever we can to get inflation in check."

"Breathe, be patient, and realize this is a storm that will pass," he said.

Calls for transparency

Tappin acknowledges that while his situation is difficult, the plight of many homebuyers is much harder, including some of his clients who are also stretched thin after signing up for variable mortgages.

"A lot of the lenders are not taking thetime to explain to buyers the actual risks," he said. "They're not doing it, and they're just rushing peopleinto the mortgages."

"The banks, their profits this year are going to be crazy, and they're making it off our backs," he added.

He says he's advising prospective buyers to wait until rates come down before buying a home.

"It's our job both as Realtors and mortgage lenders to explain the riskand not pushpeople into buying the biggest house they can. It's not responsible, and we owe our clients that duty to explain the risks."