The Bank of Canada’s July 13th full artillery barrage reverberated across the community and in the international financial markets. Expectations of an inflation number of 8.3% to come, not seen since 1981, prompted the massive move by the institution. No-one predicted a 1% increase, with most seeing a 75 basis point increase as likely, and a few assuming a 50 basis point hike. Fiscal and inflation hawks welcomed the increase, seeing it as absolutely necessary given inflation continues to rise. Not since the economic and dot-com boom era of the late 1990s has Canada seen such a massive and sudden increase in the cost of money.
The impact of the hike was immediate for variable rate mortgage holders and borrowers. Prime rates went up in response, and therein so will the cost of servicing other pools of debt. Only fixed rate mortgage holders were spared from the increase. Some examples of mortgage cost increases reflective of the Jul. 13th hike are below:
- $500,000 mortgage: $16,000 in new costs over 5 years
- $750,000 mortgage: $24,000 in new costs
- $1,000,000 mortgage: $32,000
On a modest $400,000 mortgage taken out over 25 years at 3%, monthly costs would come to just under $1,900 a month. But at 4%, these costs increase to over $2,100 a month. That $200 may not be much for a lot of people, but for many who are heavily indebted, feeling the effects of inflation, or stretched for income, it can make a massive difference in how they live. There are more and more stories of Canadians who took on floating rate mortgages now switching to fixed rate mortgages, even if it costs them more in the short term because of the anticipation of more rate increases being on their way. If you’re looking to change your mortgage and you’re self-employed for example, consider the options and flexibility of a private mortgage with Tembo in Ontario.
For years, Tembo has provided second mortgages to self employed clients who need access to their cash ASAP. Many of these clients need loans for debt consolidation, renovations, deposits for the purchase of a new home or something else. Tembo has helped hundreds of clients receive equity advances through private second mortgages often within 48 hours*. This is a great tool if you need your money quickly and don’t want to wait weeks or may not qualify with a bank.
Self-employment has been rising steadily in Canada since 2008, with 2.5 million self-employed Canadians then and almost 3 million recorded by Statscan just before the pandemic hit. Getting additional debt or a mortgage as a self employed Canadian can be complicated. Some banks require the purchase of default insurance ahead of any possible approval of a mortgage worth over 65-90% of equity. They can also require extensive documentation of at least two years of accounts and bank activity for self-employed people. If you’re self-employed and are in need of an equity advance, or any financial solutions through a private second mortgage, please visit www.tembofinancial.com and give us a call at 1-844-238-6717!