Saskatchewan borrowers up for mortgage renewal weighing stressful decision

Devyn Gregoire is looking to buy his first home and join many others in Canada who are managing their mortgages amid high interest rates.

And like them, Gregoire is struggling with what his mortgage may ultimately look like.

"If rates do go down and I get a little more to work with, that would be the world to me," he said.

Ahead of Bank of Canada's key interest rate announcement on Wednesday, Saskatchewan mortgage borrowers are looking for and expecting some relief, and those who are coming up for a mortgage renewal are asking if a fixed rate or variable rate mortgage is best for them.

"It's kind of one of those lifetime events where, you know, it's going to be a bit of a struggle," Gregoire said. "You want to put a lot of time and energy and to make that right, perfect decision."

In May 2019, the Bank of Canada’s key interest rate was 1.74 per cent. During the pandemic, the key rate dropped to 0.25 per cent.

Many Saskatchewanians who took advantage of those low mortgage rates are now part of the 44 per cent of Canadians who are up for mortgage renewal in the next year-and-a-half.

Regardless of which route homeowners choose to explore, the decision seems anything but straightforward.

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"I feel like nowadays I play more of a psychologist than a mortgage broker. Because there's just so much stress attached to the whole process now," Saskatoon mortgage broker Conrad Neufeldt said.

"A lot of the times when people are suffering from these increased payments, they're also suffering from other things like car loans, increased debts, other lines of credit, and all those other things. So it kind of has a spillover effect."

Today, the Bank of Canada's key interest rate sits at a lofty 5.00 per cent.

As other markets see mortgage payments sky rocket in the face of high interest rates, Saskatchewan has remained an affordable place for people to live.

Of all markets that participated in the questionnaire, Saskatoon was tied with London, Ont. with the lowest available mortgage rate — a 4.34 per cent fixed-rate mortgage on a six-month term.

(Source: Canadian Mortgage and Housing Corporation)

"The main piece of advice is don't let your short term pain affect your long term plan," Neufeldt said. "Because I think right now there's a real big temptation to solve the problem that's right in front of you. But (borrowers) are jumping into mortgages that potentially are going to cause much, much larger pain in the long run."

Neufeldt said many people are very interested in longer-term mortgages to pursue lower interest rates rather than lock in a short term mortgage with some of the best rates in the country.

"They want some level of stability, but they're also trying to pursue this idea of a better outcome in the long term. It's that balancing act between accomplishing both of those things, particularly in this market. It's a challenge," Neufeldt said.

Economists across the country expect the Bank of Canada to begin lowering the interest rate on Wednesday, but no one is expecting a return to the low values offered during the pandemic.

"Our baseline forecast (until 2026) is really bringing us to between 2.5 per cent and 3 per cent, but that said, it is still going to be significantly higher than what it was," said Tania Bourassa-Ochoa, the deputy chief economist with the Canadian Mortgage and Housing Corporation.

"I think we anticipate definitely that it's going to be higher for longer interest rate environment and so we really need to wrap our heads around that."

As many contemplate their mortgage future, Gregoire is patiently looking at his options, hoping for some level of relief from the Bank of Canada.

"I think the play now is just kind of maybe go back to dad's place for a bit, you know, cheap rent, save up some money, and then maybe when interest rates hopefully come down around the corner here I maybe really get real serious about getting a place," he said.  

Responses to CTV News' Mortgage Broker Questionnaire

Responses to CTV News' Mortgage Broker Questionnaire

CTV News had 59 mortgage brokers from across Canada respond to a questionnaire to gain their insight into what type of mortgage homeowners should be looking at. The following are the responses from the three Saskatchewan brokers:

Note:  All questions are based on a typical Canadian household renewing a mortgage.

Question #1:  What is the best type of mortgage to have right now?

VARIABLE RATE	FIXED RATE	IT DEPENDS
5-year-variable	x3

With over 60% of mortgages coming up for renewal in 2025 and 2026 in Canada, and the costs of everything sky rocketing over the last 4 years, Canadians will be in even more financial stress if mortgages that are currently in the 1.50% to 2.50% range come up for maturity and the options are todays rates that are in the 5’s. With interest rates expected to come down over the next 12 – 18 months, a variable rate mortgage while coming at a premium at the onset, also gives one the ability to wait for rates to come down then convert to a better fixed rate mortgage.

Question #2:  What is the best rate you can get right now?  (Specify rate and term length)

VARIABLE RATE	FIXED RATE	IT DEPENDS
5-year variable at prime minus 6.15%	5-year fixed 4.34%

 

Question #3: Should I get out of my variable mortgage if I have one?

YES	NO	IT DEPENDS
	x2	x1

At this point you’ve managed to get through the worst of rates, if all economists are correct and interest rates and Bank of Canada start to reduce, then best to waith this out for a few more months so you can lock in at better rates.

Question #4: Should I opt for a longer amortization period?

YES	NO	IT DEPENDS
x1	x1	x1

Depends, if you are struggling with monthly cash flow and leaving balances on your higher rate credit cards or personal loans, then yes; but if you can manage to keep your lifestyle intact and monthly obligations are under control, then best to payoff your mortgage as quickly as possible.

Question #5: Can I trust a bank for mortgage renewal advice?

YES	NO	IT DEPENDS
	x3

Bank employees (I used to be one) are compensated on branches profits so on many occasions, advice is given based on what makes the bank more money not necessarily what works best for customers, perfect example is banks call mortgage maturities 6 months in advance and suggesting that clients early renew so they are getting out of their 2.89% mortgage and into a new one at 5.25% because the staff member suggests that interest rates could climb between now and the maturity date when their own bank economist suggests that interest rates are likely to soften over that 6 month period.

Question #6: What piece of advice would you pass on to anyone looking to renew their mortgage?

Shop around, not only for rate but more importantly for advice that is personalized based on your circumstances. Many Canadians are hurting financially even though they have received raises and haven’t changed any of their spending habits but with everything especially necessities rising at a quicker pace than their income, they are embarrassed or stubborn to refinance all of their debt into a mortgage because they don’t want to disrupt their plan to be mortgage free, but in fact they are hurting themselves by shelling out hard earned money to higher credit card rates and sacrificing their lifestyle.