The impact of interest rate hikes and the mortgage burden on household finances
by Kenny on December 1, 2022
The impact of interest rate hikes and the mortgage burden on household finances
Since the pandemic, Canadian households have been faced with several phenomena
economic factors that greatly influence their standard of living and contribute to a climate of
uncertainty, particularly in the real estate market.
economic factors that greatly influence their standard of living and contribute to a climate of
uncertainty, particularly in the real estate market.
Canada’s real estate markets are currently in a phase of adjustment that
will extend into 2023. For obvious reasons, the rise in interest rates everywhere around the world and galloping inflation undermine the purchasing power of households and slows down the construction of new accommodations.
will extend into 2023. For obvious reasons, the rise in interest rates everywhere around the world and galloping inflation undermine the purchasing power of households and slows down the construction of new accommodations.
Figure 1. Ratio of the average cost of a mortgage to the disposable income of
households, 2006 to 2022
households, 2006 to 2022
As the graph illustrates, the mortgage burden as a percentage of household incomes in Montreal, is still not as high a percentage as the rest of Canada and has only risen recently in the last quarter. ie vs Vancouver. This also means that home ownership is far more affordable in Montreal as opposed to Toronto or Vancouver.
Going forward, rising interest rates should bring prices down in the real estate market, making the mortgage burden and home ownership more attainable in the near future
