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Fixed-rate mortgage? Here’s how much more you may have to pay when you renew — and what to do if you


Toronto homeowner Barbara Edwards has been wondering when she’d see an interest rate hike.


Alongside her partner, Edwards purchased her home in 2019 amid a dip in mortgage rates. Since average rates had historically been much higher, and rates were at a record low, Edwards said she has long expected that they’d begin to rise again.


People with five-year fixed mortgages who purchased their home at lower interest rates will, sooner or later, be renegotiating their rates — and with the Bank of Canada hiking interest rates to cool inflation, many are about to see their monthly housing payments increase.


Edwards says she and her partner made sure to buy a home that was well within their budget so they could prepare for the eventual rate increase.


“We wanted to make sure that if one of us lost a job, or was too sick to work, we could still afford to pay for our home on one income,” she says. The pair opted for a 30-year mortgage because they knew they’d have extra expenses in the first year and planned to pay extra toward the principal loan down the road.


What is uncertain is exactly how much more per month homeowners like Edwards will be paying in the next few years.


James Laird, CEO of mortgage planning website Ratehub.ca, told the Star that people who are now renewing won’t see much change just yet. Those people “would likely still be renewing at a pretty low rate,” since you can hold previous interest rates for four months, he explains — so people renewing in June, for example, could still get a lower rate from February or March.


Homeowners will start to feel a pinch in the fall, Laird says, when people begin to move from a two or three per cent interest rate to four or five.


It’s impossible to predict where rates will be in two years’ time, he adds. At present, Ratehub’s best interest rate is 4.34 per cent — up almost exactly two per cent compared to 2019’s lows.


Laird walked the Star through some calculations to give homeowners a look at the new rates they could be paying. The calculations assume a home was purchased in 2019 on a five-year fixed mortgage, with a renewal pending in about two years’ time. They also assume an average purchase price and interest rate from that year.


A homeowner who purchased a home at a five-year fixed rate in 2019 would have an interest rate of roughly 2.72 per cent, representing the average best fixed rate that year, according to data provided to the Star by Ratehub.


Homeowners who bought a home at $819,000 (the average price in Toronto in 2019) with a 10 per cent down payment and a 25-year amortization rate would have a monthly mortgage payment of $3,488.


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