Debt Management

Dealing with rising mortgages and missed payments in Canada

Are housing costs putting you in debt? The rising cost of living has put many Canadian homeowners in a difficult spot as they struggle to keep up with high mortgage rates.

For many people, the prospect of shelling out hundreds of extra dollars for a mortgage payment that is much higher than they planned, while also meeting the minimum payments on monthly bills and credit cards, is too much – some find it overwhelming. It also seems impossible. This has led to an increase in mortgage delinquency rates across the country, with more Canadians reporting missed payments. Like Michelle, others have had to make the difficult decision to sell their home.

“Last year when I was struggling to make some of my mortgage payments, it affected my credit. So, going to a lender isn’t possible right now…[my payments] It’s tripled… I’ve exhausted my savings and pared down as much as I could.

~ Michelle, CBC Radio Caller Cross Country Checkup Talking about why he decided to sell his house.

Small changes in mortgage interest rates can make a big difference in how much you’ll pay each month. In Canada, mortgage rates rise and fall based on a variety of factors. Changes in central bank policies, economic conditions, global trends, housing market dynamics, and regulations all play a role. These factors affect how much homeowners pay for their mortgage and affect the overall housing market. Rising monthly payments also have an impact on Canadians’ quality of life.

“Earlier you could enjoy your life, but now… you can’t take your kids out for extra activities, and even eating out has become so expensive… you definitely spend all your money. “There’s stress with going into mortgage payments.”
~ Caller to CBC Radio Cross Country Checkup.

If you’re worried about rate hikes or feel like you’re going into debt, you’re not alone. At Credit Canada, we talk to clients who have valid fears about losing their homes every day – we understand the stress and anxiety. You may be facing a similar situation yourself, which is why you have found yourself reading this blog post. Below we outline strategies and tips from Credit Canada CEO Bruce Salary to help homeowners reduce their stress and mortgage delinquency amid rising interest rates. Prepare their finances to deal with missed payments and debt.

Rising mortgage delinquency: cause for concern?

According to Equifax CanadaNationwide mortgage delinquencies are up 52.3 percent in the fourth quarter of 2023. These effects are more visible as people. Renew your mortgage.Especially in provinces where housing costs are high.

Consumer mortgage payments in Ontario and British Columbia rose significantly during the fourth quarter of 2023, surpassing pre-pandemic levels, the agency said. In Ontario, mortgage delinquencies rose 135.2 per cent over the previous year, while in BC, the rate rose 62.2 per cent. This may not come as a surprise to you – chances are you’ve been hearing friends, family and others around you express frustration and concern about rising mortgage payments for some time.

As housing costs take up a large portion of the monthly budget, Canadians are turning to credit cards and lines of credit to deal with the pressure. In the fourth quarter, Equifax reports that total consumer debt rose to $2.45 trillion, a 3.2 percent increase over the previous year, while non-mortgage debt rose a remarkable 4.1 percent, the biggest increase. The limit is caused by the increase in credit card debt.

According to Equifax, credit defaults are on the rise among homeowners in Canada, particularly those 36 and younger in Ontario and BC. The agency says that’s because younger homeowners have higher mortgages and less savings to draw on.

That’s a concern because as homeowners continue to renew their mortgages at much higher interest rates than before, they may struggle to keep up with their monthly payments – not just on their mortgage, but other bills and credit. On the cards. This increases their debt, affects their ability to pay, and increases the risk of bankruptcy. Equifax Canada noted that while consumer bankruptcy levels remain below pre-pandemic levels, the increase in mortgage holders declaring bankruptcy is alarming.

Managing Growing Mortgage Payments: Tips from Credit Canada CEO Bruce Salary

As a not-for-profit organization and Canada’s first and longest-running credit counseling agency, at Credit Canada we hear the stresses and strains of our clients and help thousands of people avoid bankruptcy, become debt-free and achieve financial wellness. Helped to get. Our Credit Canada CEO Bruce Salary recently joined. CBC Radio’s Cross Country Checkup To offer some insight and advice on how to navigate the stress and financial difficulties caused by mounting mortgage payments. Despite what may seem like an insurmountable situation, Bruce says it’s important to be proactive about the options available when struggling with mortgage payments.

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“We need to validate people’s experiences — frustration, worry, fear, shame — all of it, because if we don’t, it becomes increasingly difficult for people to destabilize and act.”

Bruce Celery

Below are some steps homeowners can take to deal with rising mortgages and missed payments.

Track your expenses and create a budget

Whether interest rates are going up or down or your mortgage is coming up for renewal soon, Bruce recommends creating a budget for all scenarios to ensure you’re financially prepared for any eventuality. are ready Being prepared will help you avoid being overwhelmed.

“Budget for today and budget for tomorrow because there’s a lot of talk about a rate cut that will come at some point — maybe this summer, [but] Will it make a significant difference?” said Bruce. “Because otherwise, really, you’re postponing the inevitable choice you’ll need to make.”

Bruce says that hoping that interest rates will come down soon is not a “practical” way to manage your finances. Depending on the percentage of reduction, a rate reduction may not significantly help your financial situation. Instead, create a practical budget and stick to it! There are many online budgeting tools and apps that can help you create a realistic spending plan, including Credit Canada’s free Budget Planner + Expense Tracker.

“At Credit Canada, we’re often the first call because we’re not-for-profit, we’re not judgmental — that’s what we do all day every day. And our advisors will go over your budget with you and They’ll walk you through the different options you have,” Bruce said.

Any credit card balances must also be paid in full each month. If you don’t, you’re essentially “renting money” and slowly taking on more debt over time, with no clear path to paying it back. While Bruce admits it’s painful to cut corners elsewhere to pay your bills, doing so will help in the long run.

“You’re renting money and what do you get out of it? Not much. So the sacrifices you can make to reduce that balance to zero – as annoying as it is – are really yours. will always make a significant difference in financial well-being,” Bruce said.

Talk to your lender about possible options.

Calling your mortgage lender and admitting financial struggles can feel scary. However, if you are having trouble making your mortgage payments, you can negotiate with your lender.

“So many people are dealing with situations like this – they have such a hard time, it’s so scary to pick up the phone and call your lender,” Bruce said. “[But it’s] What’s really important is that people look and see what the options are.

Depending on the circumstances, some of the options available may include:

  • A short-term mortgage payment deferral
  • Extension of mortgage amortization period
  • Changing from a variable rate to a fixed rate mortgage
  • Adding payments that are in arrears to the mortgage.

It is important to know that these options are only available to those who negotiate with their lender. “No one is coming to save you. There is help out there, but you have to initiate it. You have to pick up the phone,” Bruce said.

Get professional guidance.

Although Bruce says there is “no easy solution” to mortgage delinquency, talking to a professional can help ease your stress and get your finances back on track with debt. Coping guidance can be provided.

“It’s never just one thing. So maybe the mortgage is the most serious problem, but often people who are dealing with mortgages can’t pay, have credit card debt, or They’re unemployed or underemployed, or they have a mental health problem. A lot of different factors,” Bruce explained.

We at Credit Canada understand that balancing expenses, debt, and mortgage payments can be difficult, and we offer a variety of free resources to help you take control and manage your finances. We can also help homeowners take proactive steps to improve financial literacy and offer free mortgage management education.

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“What we try to do is help people discover insights about their relationship with money and prompt them to take action. We really think holistically – we actually They say debt is not the problem, debt is a symptom. So if debt is a symptom, what is the problem?”

Bruce Celery

“Nonprofit credit counselors are the first call you can make because they have insight into all these other variables,” he added.

From workshops and webinars to credit counseling services and other resources, we’re here to support and help you make informed decisions about your financial stability. Contact us today to learn more!

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