Canadians’ ability to adjust to higher rates could be instructive for other countries.
At the height of the COVID-19 pandemic, with his job as a delivery driver bringing plenty of overtime and the cost to borrow at record lows, James Kebe went on a spending spree.
Last March, with inflation unexpectedly roaring to a four-decade high, the Bank of Canada became one of the first major central banks off the mark in a global campaign of interest rate hikes enacted at near unprecedented speed. It raised its benchmark rate from the pandemic low of 0.25 per cent all the way to 4.5 per cent in less than 11 months.
Though the increase in both these stats is from very low levels, and still leaves them well below historic norms, anecdotal evidence suggests the strain has increased since. Adjustable mortgages now account for about 30 per cent of all outstanding home loans, according to calculations from National Bank of Canada. That leaves Canadians more vulnerable than homeowners in the U.S., where only about 5 per cent of mortgages have floating rates.
In Toronto, Canada’s largest city, the number of homes whose owners had fallen behind on their mortgage payments, allowing them to be seized and sold by the lender, hit 35 in February. There were no such “power of sale” listings three years ago, according to data compiled by Daniel Foch, a Toronto-based real estate broker and researcher.
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