Story by Lori Culbert • 7h ago
Two years ago, when Canada kept interest rates low to spur on the pandemic-crippled economy, Sarah and Graeme Dueck sold their townhome and bought a house in Langley, one big enough for a basement suite they could rent out at a subsidized price to help vulnerable youth.
Everything was going well with their altruistic plan until, spooked by rising inflation, the Bank of Canada jacked up interest rates eight times, from 0.25 per cent in early 2022 to 4.5 per cent a year later. That historic hike created a tidal wave of financial hardship for people with variable-rate mortgages, who signed those agreements at a time when no one predicted lending rates would rise so high and so quickly.
Over the last year, the Duecks’ mortgage payments nearly doubled, increasing by $2,600 a month.
“My husband and I were living in a little townhouse and we felt like we really wanted to do something about the housing affordability crisis. So we thought: Let’s buy a house where we can have a subsidized rental for somebody who really needs it. That was our motivation for actually taking on a really big mortgage,” said Sarah Dueck, who rents the suite at a below-market rate to a youth who was previously in foster care.
The couple had budgeted to be able to handle a modest rise in interest rates. In fact, consumers must show they can afford to pay a higher “qualifying rate” before being approved for a mortgage.
“But the rates rose so quickly that we had to scramble a little bit to rearrange our budget. The first thing that we did was we stopped all of our investments,” said Dueck, an engineer. “Everything we had, we started putting into our mortgage.”
She and her husband, a teacher, cancelled their Christmas vacation. They are bringing in extra money by renting out rooms in the main part of the house to two university students. They are managing, though, and do not need to sell their home to stay afloat.
“We’re hoping that things will come down in the next year. I think we’re planning on riding out the storm,” she said.