Loans that were accumulated during the record-low interest rates of past years have become lifelines for Canadian households trying to remain solvent, but paying off this debt is almost certainly the biggest challenge that Canadian borrowers will face in the near future, according to a recent study using data from Equifax.
The analysis conducted by the Canada Mortgage and Housing Corporation found that average monthly housing payments were much higher in Q1 2018 compared to Q4 2017.
In particular, Toronto and Vancouver exhibited disturbing trends. The average monthly mortgage payment in Toronto stood at $1,662 in Q1, representing a 6.4% increase from the last quarter. Meanwhile, Vancouver figures were even more noticeable at $1,794 per month by the end of the first quarter, up 6.53% from Q4 2017.
In stark contrast, Montreal saw the average payment reach $1,060 in Q1, up 2.51% from the quarter prior.
Read more: Younger, middle-income Canadians to bear the brunt of higher rates
Aside from mortgages, payments for home equity lines of credit have also seen marked increases during the first quarter of the year. In fact, the product’s rate of growth has been nearly double that of monthly mortgage dues.
In Toronto, the average monthly HELOC payment was $518 in Q1 2018, up 12.85% from the previous quarter. HELOC holders in Vancouver owed an average of $594 monthly in Q1, up 10.82% from Q4 2017.
To compare, Montreal’s HELOC borrowers shelled out an average of $582 in payments during Q1, up 5.82% from the quarter prior.
The CMHC attributed the significant Toronto and Vancouver increases to a potent combination of rising rates and large debt loads. The Crown corporation also warned that this might be just the beginning as interest rates are beginning to normalize, following several years of rock-bottom levels.