Rising Interest Rates Take a Bite Out of Consumers Household Budgets

VANCOUVER, BC, July 6, 2007 - With an anticipated increase in the Bank of Canada rate July 10th, coupled with increases in fixed rate mortgages this year already, consumers may need to re-evaluate their household budgets.

Even a rise of a few basis points could affect homebuyers and those renewing their mortgage as they are surprised by the impact on their wallets. According to the Canadian Real Estate Association, the average home price in all major markets rose in May 2007 with an average price for a home in British Columbia reaching $454,962. This translates into larger mortgages for those in the market for a new home. Scott Hannah, President of the Credit Counselling Society, the non-profit debt solutions service, says their counsellors see people every day that struggle to balance their budget to meet housing costs. "For many home buyers the continued rise in housing costs is a challenge. The rise in prices in conjunction with the increase in mortgage rates creates a big concern as people try to sustain their lifestyle and for some, keep their home."

"A homeowner with a $250,000 mortgage could see their payments rise by almost $150 per month for every percentage point increase in the interest rate," notes Hannah. "That could create havoc with their monthly budget, not to mention the thousands of dollars extra in interest they will pay over the life of their mortgage."
As interest rates rise, it is a good opportunity for homeowners to re-evaluate their spending. "We recommend that people keep a budget by listing all the monthly expenses, including mortgage, taxes, insurance, food and utilities and resist the temptation to purchase additional items such as gifts, vacations and new furniture on credit," suggests Hannah. "When a single item like the mortgage payment increases it is important to review your budget and determine where modifications can be made rather than dipping into a line of credit or using credit cards to supplement your income."

It's always important to consider the services of a Vancouver BC mortgage broker so that you insure that you're getting the best rate and the lowest payment possible. Mortgage brokers also can approve people that have been declined by their bank.