'You really just need to get through this': Advice for B.C. borrowers as key interest rate holds at 5%

While the Bank of Canada has stopped the bleeding, holding its key interest rate at five per cent for now, B.C.’s housing minister says that doesn’t do anything to increase affordability.

“I’m pleasantly surprised that they have decided to keep the rates where they are, but this doesn’t fundamentally solve the problem of what we have,” said Ravi Kahlon.

“Unfortunately it does not provide a lot of relief for Canadians that are holding variable rate or adjustable rate mortgages today,” said Andy Hill, a registered mortgage broker and co-founder of ratefilter.ca.

Not only are variable rate mortgage holders paying significantly more than they were just 18 months ago, when the key lending rate was 0.25 per cent, fixed rate renewal rates are at a 20-year high.

“Most fixed rate mortgages are going to have a six in front of it. For most people renewing a mortgage, that’s going to be pretty much a tripling of their mortgage rate. So I question how many people are prepared for that,” said Vancouver realtor Steve Saretsky.

Variable rate mortgage holders don’t have many options. “You really just need to get through this,” said Hill. “They have been along for the ride as the Bank of Canada has increased rates, and it’s made it very tough for people with variable rate mortgages written in the last two years to hang on.”

Their advice for home owners whose mortgages are up for renewal? Think short term.

“I think if you’re signing a five-year fixed [mortgage], you have to know you’re signing on close to a multi-decade high. So for most people, that’s not very appetizing,” said Sarestky.

“What we are seeing and recommending for most clients is having some interest rate security, so we are seeing a lot of people going for two-year or three-year fixed, which should give them some payment security over the next few years, and hopefully see some gradual easing in mortgage rates,” he added.

As for when the Bank of Canada could start bringing rates down, it’s all dependent on inflation.

“There are calls for cuts in the first quarter of 2024, so we may see cuts start at that point in time. We need to see core inflation numbers come under about three per cent and start to trend lower. Right now, they are at three-and-a-half,” said Hill.

If and when rates do come down, Saretsky says borrowers can’t expect to see anything like the record low numbers they enjoyed early in 2022.

“I don’t think we will see those rates anytime in the near future. So maybe a four per cent mortgage rate is the new two-and-a-half. That’s probably more realistic,” he said.

While some analysts predict rates could start to come down next year, they also aren’t ruling out another increase in 2023. The next Bank of Canada announcement is scheduled for Oct. 25.