Government Handouts Could Raise Mortgage Costs for Homeowners

Prime Minister Justin Trudeau’s latest rebates, including the GST holiday and $250 cheques, might seem like a holiday gift, but they could lead to higher mortgage costs for homeowners. While these measures aim to offer financial relief, they risk driving up interest rates, leaving many variable-rate mortgage holders paying the price.

The Cost of Stimulus 

Government spending, funded by deficits, often contributes to inflation and influences bond markets. Higher inflation gives investors less incentive to hold bonds, leading to increased bond yields and, consequently, higher interest rates.

For variable-rate mortgage holders, this dynamic translates into rising costs. A recent TD report highlights how these handouts may prevent the Bank of Canada from implementing rate cuts.

The report predicts that just a quarter-point difference in the central bank's overnight rate could add $700 annually in interest on a $300,000 mortgage.

What This Means for Homeowners 

Although the rebates aim to ease financial strain, they may ultimately leave mortgage borrowers footing the bill. The additional costs homeowners face could outweigh the benefits of these short-term government measures.

Property owners navigating fluctuating mortgage rates need strategic financial management.

Partnering with an experienced property management company like Royal York Property Management can help optimize rental income and ensure your property investments remain profitable despite economic shifts.

Source: Financial Post