While most Canadians say they could handle rising interest rates, 20 per cent indicated that a two per cent rise in rates would hamper their ability to afford their home, according to a new report.
The Leger Marketing report, released by BMO Bank of Montreal revealed that the majority of Canadian households (57 per cent) are 'stress-tested' against the possibility of rising interest rates. In addition to the 20 per cent of people who would be adversely affected by a two per cent rise in rates, 23 per cent also indicated they were unsure if a rise in rates would affect them.
The survey also revealed that almost half of women (49 per cent) would have trouble affording their home in the face of rising rates, while more than one-third (37 per cent) of men claimed the same.
According to Doug Porter, Deputy Chief Economist, BMO Capital Markets, financial stability for Canadian homeowners in the coming years will be supported by locking-in and opting for shortened amortization periods.
“Our interest rate outlook now projects that fixed mortgage rates will trump variable. While the decision ultimately depends on the individual, low rates combined with a shorter 25-year amortization will significantly strengthen household financial stability,” he said.
Regionally, those that said a two per cent rise in rates would hamper their ability to afford their homes was higher in Alberta (73 per cent), Mantioba/Saskatchewan (69 per cent) and Ontario (58 per cent), while lower in B.C. (48 per cent), Quebec (51 per cent) and Atlantic Canada (50 per cent).
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