Mortgage rate increase: how will I afford it?

Posted on 7 June 2023

Written by Chris Galea

It seems like literally everything is going up in price these days in Canada – the price of rent, the cost of living, and of course interest rates on mortgages. Along with everything else, it can feel very worrying when you consider your mortgage interest rate going up – even as little as 1%. You may be wondering how you can afford a mortgage rate increase and the additional funds required each month, and where you can find the extra money. In many cases, you will likely need to look at where you can cut back and examine your financial situation to assess where you can make some simple changes. You may want to consider ways to earn more money, too. In this article, we share our top tips on how to best handle a mortgage rate increase.

Understand how a mortgage rate increase affects you

Your bank should lay out for you exactly how a mortgage rate increase looks for you, but you need to ensure you understand exactly what this means for you and your finances. Confirm exactly what a percentage increase to your rate means in dollars each month. Once you know the extra funds you need to pay each month, you can then focus on how to find this.

Ensure your mortgage payments are affordable

If you are already struggling to make your mortgage payments each month, it is unlikely that a mortgage rate increase is going to make things any easier for you. As mortgage interest rates increase, you will likely need to renew your mortgage at a higher rate when it comes to the time. While approaching this time period, you should consider how much you can reasonably afford. If it looks to be a struggle, it is a good idea to begin planning out your finances so you can prepare before your mortgage lender has to decide for you.

Lock in your mortgage interest rate for as long as you can

If you think that mortgage rates could rise incrementally, it may be a good idea to lock in your variable rate or open mortgage for as long as you can. Provided mortgage rates do increase as they have recently, this could be a smart move. Speak to a mortgage broker or financial expert for advice on locking in a rate before a mortgage rate increase, and to figure out what is best for your situation.

Cut back your living expenses where possible

With the cost of most things in life increasing right now, you should try to help yourself where possible by keeping life as affordable as you can. Try learning how to budget in a way that stops you relying on credit cards and borrowed money. Assess all your expenses, and see how you can pull back and reduce these where possible – simple things like cutting down takeouts in favour of cooking can all add up. Careful money management can truly make all the difference to your financial situation.

Pay off affordable debt as quickly as possible

If interest rates are reasonably low at present, or if you have a loan or credit with a low interest rate, it is a smart idea to pay off this debt as soon as you can before it increases. The more of your debt that you can pay off while interest rates are low, the less painful an increase in rates will be later on. It could also save you hundreds or thousands of dollars long term, and will give you a sense of achievement.

Lock in low interest rates on debts you cannot repay quickly

For any other debts you may have on your plate that may have a significant balance, or that you cannot pay off immediately, it is a good idea to lock these in at a lower interest rate. With a potential mortgage rate increase on the horizon, taking control over your other debt and stepping away from revolving credit in the long term will help you and may help you to stop spending.

Use your home to create income

As a home is usually most Canadians’ biggest asset, it makes sense to see if it can help us to generate income – especially in light of a mortgage rate increase. Consider renting out a room or offering your storage or garage for rent. This extra income may help to counterbalance the additional costs of a mortgage each month, and could help to relieve the associated stress.

Speak to a Licensed Insolvency Trustee

If you think your situation is more problematic than applying some of the tactics above, you should book a free consultation with a Licensed Insolvency Trustee. In Canada, Licensed Insolvency Trustees are the only professionals legally able to file all forms of debt relief. At Spergel, our expert Licensed Insolvency Trustees will review your financial circumstances and recommend the best pathway to debt relief for you. This may be bankruptcy to eliminate your debts, or a consumer proposal which can reduce your debts by up to 80% while allowing you to keep your assets including your home and car. We have been helping Canadians on their journey to debt relief for over thirty years, and we are here to help you too.

If you are concerned about a mortgage rate increase and how you will afford it, book a free consultation with a Licensed Insolvency Trustee at Spergel. Our expert Licensed Insolvency Trustees will review your financial circumstances and help you to understand your available debt relief options. No matter how bad you may feel your financial situation is, there is always a solution. Reach out today – you owe it to yourself.


Chris Galea

Chris Galea is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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