On July 13, when the Bank of Canada will make its next policy decision, the market is gradually pricing in a 75-basis-point rate hike (several economists and strategists are even predicting a full-point hike). For those who have variable-rate HELOCs, that would entail an increase in payments once more.
By borrowing up to 80% of the value of their property in addition to a mortgage, homeowners can access the equity in their homes through a HELOC.
Earlier this week, the Office of the Superintendent of Financial Institutions disclosed several impending rule changes. By the end of 2023, borrowers would have to make principal and interest payments on any total loan balance that was greater than 65% of the value of the home.
Technically, HELOC lenders can demand complete repayment at any time, and customers often must pay off their HELOCs in full before they can transfer mortgage lenders. If borrowers are not setting aside more funds to pay down their HELOC to stay up with interest payments as rates climb, this could become an issue.
According to the poll, home improvements (43%), debt consolidation (30%), and vacations (13%) were the three most popular uses of a HELOC for borrowers.
