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Luckily my mortgage is locked in for the next three years at 5.5 per cent, but a look at rates on CanadaMortgage.com turned up five-year rates between 5.65 and 7.15 per cent. Short Term mortgages, six months to a year, start at about 7.1 per cent and top out at 9.24 per cent.
Depending on how much you borrowed and when, your next mortgage rate could be one per cent or more higher than the rate you’re currently paying. Putting that into perspective, every percentage increase means another $1,000 a year in interest on every $100,000 you owe, on top of what you paid before. If you owe $200,000 on a mortgage, that’s another $167 a month in interest.
According to the latest Canadian Housing and Mortgage Corp. figures, the average Canadian family spends about 37 per cent of income on mortgages. The budgeting rule of thumb used to be that you should never spend more than 30 per cent or a third of your income on food to leave enough room in the budget for other costs, but that went out the window years ago. Despite rising interest rates and real estate costs, Canadian mortgage debt is set to top the $1 trillion mark for the first time in 2009.
The worry is that a sudden drop in housing prices or sudden increase in mortgage rates could result in disaster for both the banking industry and homeowners, similar to the subprime mess that’s unraveling in the U.S.
So, to recap the basic cost of home ownership, taxes and strata, increased by $660 this year compared to last year, or by an additional $55 a month.
The increases don’t end there.
Starting on July 1, Terasen Gas will be charging 16 per cent more for propane in Whistler, reflecting global fuel prices. It’s less than the 22 per cent they applied for, and an increase was already on the way to cover the switch from propane to natural gas, but it wasn’t an expense I was expecting until 2009.
My annual gas bills add up to around $480 a year, although we didn’t use as much this past winter and I’ve been working to weather proof my home a bit better. However, if my consumption remains the same a 16 per cent increase is equal to about $77 more a year.