How rising interest rates are affecting retirement plans for those with mortgages
Updated: Nov 12, 2022
Analysis from Principal Chris Merrick published by The Globe and Mail on how interest rate hikes are impacting those close to retirement.
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Quote from the Globe and Mail:
Faced with elevated real estate prices and high inflation, Chris Merrick, a fee-only certified financial planner (CFP) with Merrick Financial Inc. in Toronto, says he’s seeing more clients in the Greater Toronto Area carrying mortgage debt into retirement.
“The prices have gone up so much, it isn’t always so easy for them to sell and get another [home] in the same area, even if it’s a bit cheaper,” he says. “So, often clients like to hold onto the house longer with the mortgage just to stay in the current area.”
Rising interest rates have left many of these clients with questions about the impact of higher mortgage payments on their lifestyle, Mr. Merrick says. That includes clients holding variable-rate mortgages who may see less of their payment going toward the principal and those with fixed rates looking toward renewal.
“If they’re looking to retire now, they were around in the 1980s when the mortgage rates were astronomically high,” he says. “A lot of them realize [those rates are] unlikely to happen, but they’ve lived through that once in their life, so they know it can happen.”