Posthaste: What another Bank of Canada hike could mean to the housing market and borrowers

Most expect another hike tomorrow, and the market is putting high odds on a quarter-point increase, which would take the rate to 4.5 per cent.

Signs of stress have been showing up in the Bank of Canada’s own indicators, says Capital Economics. The Bank uses the share of new mortgage borrowers with a debt service ratio of more than 25 per cent of income to identify financially vulnerable households. That share has grown from 12 per cent before the Bank started hiking to 27 per cent in the third quarter. Capital calculates that the share is on track to reach 35 per cent this quarter.

Currently the mortgage stress test puts the minimum qualifying rate for an uninsured mortgage at the greater of the contract rate plus two per cent, or 5.25 per cent.mortgage expert. “If the BoC raises the overnight rate, we may see a slower housing market during the traditional spring housing rush than we are used to, as buyers wait for the market to bottom out before purchasing.Article content

RATESDOTCA says for every 25 bps increase a homeowner with a variable-rate mortgage can expect to pay about $14 more a month per $100,000 of mortgage.

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