Canadians homebuyers paying 250% more in interest compared to last year

Canadians are paying a staggering amount more in interest rates this year than last, according to ratehub.ca.

It’s no secret that home sales have considerably slowed across Canada, partially thanks to those rising interest rates.

Still, the increased amount is startling, with ratehub.ca suggesting that Canadians are paying 250% more in interest charges this year compared to 2022.

You might also like:
• Here’s why purchasing a home from a reputable builder is important for first-time buyers
• Homeowners in Canada could face a 21% jump in mortgage prices: report
• "This has been hell": Scotiabank mortgage mistake financially wipes out couple

According to ratehub analysis, in October 2021, a homebuyer with a mortgage of $600,00 and a five-year fixed mortgage rate of 2.09% with an amortization period of 25 years would have paid $12,310 in the first year of the mortgage alone.

In 2022, a homebuyer with a mortgage of $600,000, a five-year fixed mortgage rate of 5.24% with the same amortization period, would pay $30,819 in the first year of the mortgage alone, a difference of $18,509.

Ratehub crunched the numbers, which suggest a homebuyer with the same size mortgage in 2022 would pay 250% more in interest alone in the first year of their mortgage compared to a homebuyer in 2021.

It is no wonder that home sales have stalled so significantly across the country, with interest rates having increased astronomically.

Ratehub co-CEO James Laird chimed in.

“It is unsurprising that this has turned off many potential homebuyers in 2022,” he said.

“I have seen year-over-year change in mortgage interest costs quoted as between 10 to 20[%}. I don’t know how these calculations are being done, but I know with certainty that both fixed and variable rates have more than doubled over the past year.”

While this is good news for prices, which have trickled down slightly, the rise in interest rates has essentially negated the cost benefits.

According to the Canadian Real Estate Association (CREA), while national home sales saw a bit of a bump in October compared to September of this year, year-over-year October 2022 sales were 36% below October 2021 sales.

The CREA says that the “actual (not seasonally adjusted) national average sale price posted a 9.9% year-over-year decline in October.”