Windsor homeowners struggling with big mortgage renewal hikes

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Those cheaper mortgages obtained during the COVID-19 pandemic period are now causing increasing pain for Windsor-area homeowners experiencing an average increase of $600 per month for renewals.

“That’s no surprise and you’re going to see a continuation of that,” Windsor mortgage broker Joe Bondy told the Star.

“Eighty per cent of all mortgages (in Canada) are due up in the next three years,” he said.

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“Everyone locked in at under three per cent is going to move to the mid-fours or five per cent. With debt climbing, disposable income has dried up and people are using credit to buy time.”

An Equifax Canada report released this month on consumer debt in the first quarter of 2024 revealed missed payments on mortgages delinquent for 90 or more days topped $1 billion nationally for the first time.

The total value of delinquencies has also doubled since the beginning of the COVID pandemic.

Higher interest rates aren’t the only reason for inflated monthly payments. The average mortgage in the Windsor region has also grown to $457,000.

“That’s way up from last year’s average of $367,000,” Bondy said.

“A lot of people are rolling over higher interest rate debts, like credit cards and lines of credit, into their mortgage. People are more concerned about their monthly cash flow — allowing them to maintain their current lifestyle — than paying off their house.”

The average mortgage in Canada is $321,700, an increase of 3.1 per cent compared to the first quarter of 2023.

“The introduction of mortgage stress testing in 2016 has helped to mitigate against the full effect of sustained high interest rates, but we still saw more than 34,000 consumers missing a payment on their mortgage in Q1, which is up 22.7 per cent compared to 12 months ago,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada.

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“It’s not just homeowners feeling the strain. Whether you own or rent, the high cost of living remains a heavy burden for many.”

Mortgages now represent 74.4 per cent of all consumer debt in Canada. That’s an increase of 3.1 per cent.

Canadians also remained hesitant to enter the housing market with the Bank of Canada rate lingering at five per cent until this month.

The number of new mortgages created hit an all-time low in the first quarter, refinanced mortgages were down 2.6 per cent and mortgages taken out by first-time buyers declined 10 per cent.

“These are challenging economic conditions and as financial stress increases, we are seeing consumers adapting their credit decisions to help manage through this period,” Oakes said.

“Many are extending their mortgage length to reduce their payments and mitigate the impact of payment shocks, despite the penalty of longer loan commitment terms. People are also seeking better deals and rates, leading to relatively more lender switching.”

Bondy said the national patterns in the Equifax Canada report are being replicated locally.

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Bondy noted there has been a significant increase in consumers having to negotiate financing with Class B or private lenders because the percentage of their income servicing debt exceeds the banks’ ceiling of 44 per cent. A private lender will allow as high as 55 per cent of income to go to debt servicing.

However, in return for taking on a higher-risk loan, these lenders charge a premium interest rate. B lenders charge about seven or eight per cent while private lenders charge 10 to 12 per cent.

Bondy said the banks are even pushing their own ceilings to 49 per cent in some instances to help people stay in their homes.

“We used to have 90 per cent of our clients with A lenders and 10 per cent with B and private lenders,” Bondy said. “Now we’re 75 per cent with A lenders while the others have gone up to 15 per cent.

“We started to see that change last October/November.”

With housing costs requiring an increasing amount of household income, Bondy said families are turning to credit. Consumer debt rose 3.5 per cent to $2.46 trillion nationally by the end of the first quarter.

The average non-mortgage debt is $21,276 in Canada while Ontarians average $21,869. The highest average debt is in Newfoundland ($23,812).

The financial stresses have resulted in over 1.26 million Canadians missing a payment on a credit commitment in the first quarter, which is an increase of 22.7 per cent over 2023.

The delinquency rate in Canada for non-mortgage credit payments has increased by 24 per cent year-over-year. Quebec had the biggest increase (31 per cent) followed by Ontario (28 per cent).

Dwaddell@postmedia.com

Twitter.com/winstarwaddell

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