How to get your mortgage rate right

A new analysis of mortgage rates in Canada suggests the average home buyer will have to pay an extra $1,100 in taxes to cover their monthly payments.

The new analysis by real estate firm Cushman & Murray suggests the federal government will be on the hook for $1.8 trillion of federal debt over the next 10 years as a result of the mortgage rate changes announced in February.

It’s a huge increase from the $1 billion the government initially predicted in the first quarter of 2019.

But it won’t be enough to pay off the $2,000 federal mortgage insurance premium the government currently owes to lenders.

Instead, the government is expected to pay $1 trillion in interest to lenders over the same period.

That would leave the federal debt-to-GDP ratio at a new high of 163 per cent, or nearly $4,700 per household.

That means the average household in Canada is going to have to fork out $1 per household in federal debt to cover mortgage payments.

A single parent who takes on a mortgage to pay for childcare and house expenses is now expected to have $3,100 of debt to pay over the 10-year period.

The median household in the province of British Columbia would pay $5,500, while in Manitoba, the median household would pay more than $7,000.

And in Ontario, the average homeowner would have to cough up $5.75 per household, or about $1 million over the period.

The real estate market is so sensitive to interest rates that a rise in interest rates is unlikely to be enough for the average Canadian to pay their mortgage, according to the report.

“The average homeowner is going not only to have a significant increase in their monthly mortgage payments, but they’re also going to be facing a significant decrease in their tax liability,” said Mike Bohn, senior economist at the Cushmans.

There are several other factors that could drive up the mortgage debt burden, he added.

In the United States, the interest rate increase is expected this year to be 3.5 per cent on the 10 years’ mortgage, with a 1 per cent increase for the two years.

House prices are expected to remain relatively flat through the decade, which would also mean a smaller federal debt burden.

The government has also warned that any changes to the housing market will have an impact on Canada’s economic recovery, so there’s a risk the increase in interest costs could have a ripple effect across the country.

Bohn expects the tax hikes and interest rate changes will continue to be significant in the coming years.