Canadians have seen rent, food and gas prices soar in the past year, and now hundreds of thousands of households can expect another hit: rising monthly mortgage payments.

Many borrowers who took out variable-rate mortgages during the height of the housing market frenzy in 2021 and early 2022 could face higher payments next month — or even the need for a lump-sum payment on their mortgages.

A “trigger rate” is the point at which interest payments eat up all of a monthly mortgage payment, and the borrower is no longer paying down the principal they borrowed — something that’s not allowed under Canadian lending rules.

This means borrowers will be contacted by their lender and, typically, given the option to either increase their monthly payment, or make a lump sum payment against their mortgage to lower the amount owing. 

Depending on their mortgage, borrowers may also have the option to switch to a fixed-rate mortgage – though Rabidoux and others warn there’s a chance borrowers could end up locking themselves in at unnecessarily high rates.

Continue to read on: STOREYS.com