Mortgage rates cause for "sympathy'

Mortgage-rate hikes don't bother Agnes Schoepfner. She's living debt-free -- in a 10-metre RV in South Surrey.

But she has a lot of sympathy for people trying to get into their first home or renewing a mortgage.

She knows they've seen mortgage rates jump four times in the last month for an increase of 60 to 70 basis points, depending on the mortgage chosen.

Schoepfner, a 54-year-old retiree, has owned four houses and a condominium. She has some words of caution for anyone making what will probably be the largest purchase of their life.

"I do have sympathy for them," she said. "Even the worst house is $300,000. The market has gone crazy. People have to live somewhere."

But she advises taking a business-like approach.

"Treat your life as you would treat a corporation. You are the CEO; pay yourself first. What can the budget afford [for housing]? Do a forecast like you would do a business plan."

Schoepfner spent six years planning her own escape from a mortgage and debt. She now splits her RV'ing time between the Lower Mainland and Kelowna.

Her husband is semi-retired and changed careers to become a long-haul trucker. When they want to go somewhere "exciting," he books work there and they hit the road together.

Still, not everyone can sit in the passenger seat like Schoepfner can.

If you have a $300,000 mortgage that's just expiring, expect a shock.

A three-year term available for 5.25 per cent in 2004 now has a posted rate of around 7.30, meaning the monthly principal and interest would jump from about $1,787 to $2,157 -- or more than $350.

Still, the mortgage sky is not falling, according to B.C. Central Credit Union chief economist Helmut Pastrick.

"It's not a catastrophe, not a crisis," said Pastrick. "It may mean tightening the belt for some that are refinancing.

"For those entering the market, they may have to hold off or postpone that decision," he said.

You can calculate exactly what the mortgage-rate increases will mean for you by going to an online calculator like the one at www.vancity.com and plugging in your numbers.

Better rates than those posted are often available if you shop around, according to Victoria mortgage broker Maria Dominelli of Invis.

"If you've got good equity and you can tolerate the peaks and valleys with interest rates, I don't see the variable rate [mortgage] as a bad product," said Dominelli.

But if you haven't accumulated some equity or just worry too much about fluctuating rates, Dominelli advises consumers to "lock in."

"Six per cent or under six per cent is pretty darn good," she said.

The situation is just tougher in the Lower Mainland because, according to an RBC Economics study, owning a home here can now cost a staggering 70 per cent of the average household income. fluba@png.canwest.com

How bad is it?

If you're getting a mortgage this week, you will be paying more to borrow than if you had renewed last week, last month or last year, or even if you got a guaranteed rate in the last three months. Here are some examples of today's rate for a three-year closed mortgage versus that of three years ago.

2004 2007

5.25 per cent 7.30 per cent ($100,000 loan means monthly principal and interest of:)

$595.92 $719.04

($300,000 loan means monthly principal and interest of:)

$1,787.75 $2,157.11 -- examples from Helmut Pastrick, chief economist, B.C. Central Credit Union

(prepared by Frank Luba/Vancouver Province)