A lot happened in the mortgage world this week. Here are three stories worth paying attention to – and what they actually mean for your situation.
The Renewal Payment Shock Is Real – But It Depends on Your Mortgage Type
New data released this week puts a concrete number on what mortgage renewal is costing Canadians right now.
If you locked into a fixed rate during the pandemic and you’re renewing today, the average payment increase is $622 per month. That works out to $7,464 more per year than you were paying before.
Here’s the number that tends to surprise people: if you were on a variable rate, the increase at renewal is about $36 per month.
The difference comes down to how each product works. Variable-rate borrowers saw their payments adjust each time the Bank of Canada moved rates. The increases were spread over the course of the term. Fixed-rate borrowers held steady – and now they’re absorbing the full gap all at once.
If your renewal is coming up in the next six months, the time to run the numbers is now – not when the letter arrives from your lender. What you owe, what you’re renewing from, and what term makes sense next all affect the outcome. That calculation is worth doing in advance.
Toronto Home Prices Are Back to December 2020 Levels
Toronto’s real estate board released March numbers this week. The benchmark price for a home in Toronto is now $928,000 – the lowest it has been since December 2020 and down more than 26% from the pandemic peak.
Condo prices dropped further. The average GTA condo came in at $620,479, down 9.1% from a year ago.
At the same time, sales rose slightly year over year and new listings fell. More buyers in the market with fewer properties available suggests prices may be stabilising.
What does this mean from a mortgage perspective? Lower prices mean a smaller required mortgage. If you were priced out of the Toronto market two or three years ago, the math looks different today than it did then.
Whether that changes anything for your situation depends on income, stability, how much you’ve saved, and how long you plan to stay. Those are the variables that matter – not the headline number alone.
Breaking Your Mortgage Early Could Cost More Than You Think
This one is important if you have a fixed-rate mortgage and you’ve been thinking about refinancing or breaking your term early.
Bond yields have been rising over the past several weeks. In most circumstances, you’d expect mortgage rates to move in the same direction. Instead, several major banks have actually been cutting their posted mortgage rates.
That disconnect matters because the penalty for breaking a fixed-rate mortgage – called the Interest Rate Differential, or IRD – is calculated using the gap between your current rate and the lender’s posted rate for a comparable term. When banks lower their posted rates while yields rise, that gap gets wider. A wider gap means a larger penalty.
Variable-rate mortgages cap the break penalty at three months’ interest. Fixed-rate mortgages work differently. After the first six months of your term, the IRD calculation kicks in – and it can produce a number that’s significantly larger than most people expect.
Before you make any decisions about breaking your mortgage, get the penalty calculation in writing from your lender. An estimate is not enough. The actual number affects whether a refinance makes financial sense, and you need it before you can evaluate your options properly.
If any of these stories apply to your situation, I’m happy to walk through the numbers with you.
Connect with me directly at 249-480-1249 or visit HumberBayMortgages.ca.
Simon Browning | Mortgage Agent Level 2 | BRX Mortgage 13463 | 249-480-1249 | HumberBayMortgages.ca
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