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A Manulife Bank of Canada survey reveals that 15 per cent of mortgage holders would face a financial crisis if rates rose or they got downsized. Most analysts now believe interest rates will rise this year.
Nearly half said they couldn’t manage a 10 per cent increase in their mortgage payment.
It is likely the Fed will raise rates by one quarter of a point only this fall and the Bank of Canada may not follow immediately, but mortgage rates also could be affected by movements in the bond markets.
Faced with loss of employment by the major breadwinner, most respondents to the survey said they had a very limited financial cushion.
About 16 per cent said they’d be in trouble within a month and a total of 43 per cent said they’d have difficulty within three months if someone in the household lost a job.
The online survey was done for Manulife by Research House between Feb. 10 and 27. The survey polled 2,372 Canadians in every province, all of them homeowners between the ages of 20 and 59 with a minimum household income of $50,000.
Manulife found the average amount these homeowners had outstanding on a mortgage was $190,000.
Albertans were carrying the heaviest debt load — an average of $242,400 on the mortgage. That’s followed by $217,600 in British Columbia, $197,100 in Manitoba and Saskatchewan and $193,000 in Ontario.
But 78 per cent of respondents to a survey said paying down debt was a priority for their household and 40 per cent had either increased the amount they pay towards the mortgage or made a lump sum payment within the past year.
An interest rate hike would prompt thousands of investors to put their investment properties on the market or move into a cheaper living unit. This would result in a housing glut which would cause what many expect- a correction in the real estate market.