Posthaste: 'Tip of the iceberg' — Canadians' debt service costs expected to soon hit record high
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The Bank’s most recent hike in December raised its rate by 50 basis to 4.25 per cent. TD expects one more hike will take the policy rate to 4.5 per cent by the first quarter of 2023. It has been a steep climb since rates sat at 0.25 per cent at the beginning of this year. New borrowers are already feeling the impact. Variable-rate mortgages have climbed in step with the Bank’s increases and fixed-rate mortgages have risen by more than 200 basis points, says the report.
First disposable income grew, almost as much as debt, bolstered by government pandemic aid and when that ended by wage growth. The second was the decline in the effective interest rate from 4.4 per cent in the last quarter of 2019 to 3.4 per cent in the first quarter of 2022, said TD. The effective interest rate is calculated by dividing total interest payments by total debt.Article contentBut that has changed.
Meanwhile, up to 18 per cent of fixed-rate mortgages come up for renewal next year and borrowers looking to renew will be facing the highest interest rates in 20 years, said TD.
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