What to do if you can't afford your mortgage

Interest rates are starting to impact the housing market with some homeowners at the brink of affordability.

After eight consecutive hikes, Bank of Canada interest rates are now being held steady at four and a half per cent.

“And that’s just the Bank Of Canada rate, that’s not what people are getting mortgages for,” Real Estate Broker, Tony Johal said. “Keep in mind there’s a stress test now as well.”

Those with fixed rate mortgages who are currently paying one or two per cent interest and are coming up for renewal are feeling the pressure.

Meanwhile, variable rate homeowners have already been feeling the pinch.

“Of course one of the things people do consider right away is downsizing their house and downsizing their mortgage just to get it back in line with their lifestyle,” Johal said. “One of the big reasons that people are contacting us these days is quite simply because the rates have made somebody’s payments on a mortgage renewal very, very expensive.”

But a smaller home, isn't the only road to a smaller mortgage.

“Get a professional on the line, and just let them run down your finances, your mortgage payments, all that stuff. Don't leave it to the last minute,” Mortgage Agent, Michael Kitts explained.

Richard Kitts says talking to an expert, even a year before your renewal, if you can, will allow you to start mapping out a plan.

“There is ways of maybe reducing the payments. Longer amortizations, there is interest-only programs out there which you have to be careful with to explore them but I think the main thing at this point is try not to panic, rates are steady now,” Richard said. “The halt on these rates will help out, at least it will keep us level and find a balance to everything.”

When talking to their lenders, homeowners can also ask about skipping a payment or using the equity they already have in their home.

“There is not a one size fits all solution and speaking with a mortgage professional is probably a good idea,” Richard said.

As far as the local market is concerned, overall prices are decreasing but inventory remains low.

Buyers are being approved for less than they would have liked and some sellers are scared they won’t get as much for their home as they feel they deserve in a time period they would like.

“It’s like a ripple effect within everything,” Johal said.

The Bank of Canada’s next scheduled rate announcement is set for April 12th.