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Housing Has Become a Financial Stress

Housing Has Become a Financial Stress

June 3, 2023

Increased interest rates and higher house prices are causing financial stress, writes Peter Watson.

The attraction to homeownership remains strong; however, the financial risks are growing.

The Bank of Canada predicted that homeowners renewing their mortgage in the next few years will see an increase of 20 to 40 per cent in monthly payments. This information by BOC was included in its annual Financial System Review. (1)

In the next several years nearly everyone with a mortgage will have to renew at today’s higher interest rates.

Adding fuel to the fire is the reality that the population of Canada is growing faster than the new supply of houses. People need a place to live, including young adults as they enter the home buying market, plus immigrants that have chosen Canada as their new country.

The perfect storm is mortgage carrying costs are making houses unaffordable and at the same time strong demand is causing prices to continue to rise, especially in the GTA.

This predicament will have a ripple effect on Canadians and the Canadian economy. Parents are providing financial assistance to their children to buy a house. Potentially both parents and children might be financially extended.

More disposable income is being directed to homeownership. That will affect normal consumer consumption. If people spend too much of their disposable income on housing, they will have less funds to spend on normal everyday events including maintaining their lifestyle.

This will negatively affect businesses because potential consumers without disposable income will reduce their spending.

Homeownership is still and dream, but the economic reality is it has become a financial stress.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through