Would you have trouble paying your mortgage if it increased by 10 percent? According to a recent poll by Manulife Bank, almost three-quarters of Canadians would find it difficult to meet this significant payment hike. Survey data was collected from over 2,000 homeowners between the ages of 20 to 69 with household incomes of $50,000 or higher. The results of the poll emphasize just how strict monthly budgets are for many Canadians.
Breaking Down the Poll Results
38 percent of Canadians polled indicated that their mortgage could rise between one and five percent before running into financial difficulty, while 20 percent said they could manage if payments only increased between 6 to 10 percent. An additional 14 percent of those surveyed, stated that any increase in their monthly payments would pose a problem.
Conversely, 22 percent said they could handle a mortgage hike between 11 to 30 percent, while the remaining 7 percent were undecided. Homeowners who find themselves in the majority must prepare for rising interest rates. If rates increase by as little as 1 percent, borrowers are facing the possible reality of a 10 percent increase in monthly mortgage payments.
What Effect Does the Mortgage Hike Have on Each Generation?
Different generations are not equal in terms of their financial flexibility, as the survey would indicate. 45 percent of millennial homeowners would face the most difficulty making their mortgage payment within 3 months or less if their household’s higher-income earner were to become unemployed. Out of any generation, Millennials must also contend with the worst rising mortgage debt. The breakdown of outstanding mortgage debt for each generation is as follows:
- Millennials (ages 20 to 35) – $223,000
- Gen X-ers (ages 36 to 52) – $202,000
- Baby Boomers (ages 53 to 70) – $180,000
Millennials are not the only generation that would struggle with sustaining increased monthly payments. Baby boomers must deal with similar challenges as millennial homeowners. 41 percent of baby boomers have reported that 60 percent of their household wealth is tied up in home equity. This means that baby boomers may need to rely on the sale of their home in order to fund retirement. Regardless of generation, the survey also revealed that 51 percent of Canadian homeowners have $5,000 or less set aside to cover financial emergencies, while one fifth do not have anything saved at all.
How to Stay on top of a Mortgage Hike
Using a flexible mortgage and learning how to effectively structure your debt, can help you deal with rising interest rates and a hike in your monthly payment. A flexible mortgage adapts to individual circumstances by offering the ability to modify or stop payments, so you can overcome financial difficulties with greater ease.
Talk to a trusted second mortgage broker in Aurora to help you reassess your mortgage. Call the experts at Accumetrix Mortgage Alliance today at 905-780-0908.