How rising mortgage rates could be a good thing

Real Estate Agent with sales representative : Keller Williams Experience Realty

There are things I can recall from childhood and our parents generation you don't see today.  One that merits positive regard was our parents fiscal responsibility, especially regarding the family home.

Something that was common then was mortgage burning parties. This is one social gathering I have never heard of in my generation as mortgages seem to be eternal rather than a means to an end.

Today, as paid down principal on a mortgage accumulates, its whisper grows louder and becomes overwhelming to many, manifesting itself in unshakable visions of hot tubs, home theaters and luxury kitchen and bath projects. For many more that equity is a cry for a more expensive home purchase and or a new set of wheels. 

I went to a high school reunion a few years ago and found it interesting to learn just how many of the old class-mate's parents still live in the homes we grew up in, mortgage free for the last 25 or 30 years. What is interesting is our parents too are now enjoying many of the same accessories of the good-life we are taken in by at home, car or boat shows. Those childhood homes now sport up to date kitchens and baths and somehow it doesn't seem right that dad's new flat screen TV is bigger than mine. Being mortgage free for so many years mom and dad don't need to leverage these perks and privileged.

While most of my generation was growing up our parents were dealing with double digit interest rates on their mortgage. The fact that houses were a fraction of what they cost today is irrelevant, so were wages of the day and most households had one income earner. Paying off that mortgage took precedent over just about anything else. 

It might have meant driving the same car for 10 years or watching Opie Taylor evolve into Ritchie Cunningham all on the same black and white TV and knowing the same avocado fridge and stove from junior kindergarten on through to graduation but by the time many of us were experiencing what a hang over felt like for the first time, the family home was all but paid off. 

With interest rates on the rise now for the first time in over ten years perhaps people will begin to take note of the options available to us for accelerating payments on our mortgages and more will actually stop and do the math to determine how much can be saved over the long term by going bi-weekly over the monthly payments we make towards the mortgage.

Those who still have less than 25% of their home value paid off will reap an additional savings when they no longer require CMHC mortgage insurance and some will roll that savings over into payment increases towards the principal. These strategies can more than offset the interest rate increases we are expecting and are probably the only risk free investment choices available to us if we start recognizing our homes as long term investments, rather than piggy banks.


Posted by

 Mike Montague


Barrie Power of Sale Listings

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Ellen Caruso
Daniel Gale Sotheby's International Realty - Glen Head, NY

Its funny to think it is our generation living the good life, when it was the simple things that meant the most. For them it was the invention of colored TV, for us Plasma, flat, High definition, 3-D.....???? Things change so fast, its not the generation of good life, its no money in the bank cause were so busy buying to keep up with change and what we think we need.


Jun 02, 2010 03:51 AM #1
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON


I think it is a good thing and obviously the Bank of Canada does as well. With household debt being the highest ever for the average Canadian, paying down debt is a good thing.


Jun 02, 2010 07:05 AM #2
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