Young Canadians who are carrying mortgages have been disproportionately affected by the rapid rate of interest rate increases. Although interest rate increases were foretold (don’t tell me they weren’t since you had to qualify for the mortgage and pass a stress-test!), the fact of the matter is that home ownership provides many Canadians with a feeling of security and future building that no other asset can provide. However, the effect of interest rate increases is the same across all mortgages. Mortgages are front-loaded in interest. In other words, each payment covers the cost of interest first and any money that is left over is applied against the principal. Servicing the interest on a large balance usually means that not much is paid against principal in those early years; making your stomach turn when you review the mortgage statement.

There is no magic strategy that can be applied to help these young Canadians and families. With a commitment to a mortgage, you simply must restrict other spending if home ownership is that important to you. However, just as the interest rate increases were anticipated, so too are future interest rate declines. Economies cannot sustain high interest rates indefinitely; but the rate of decline is unlikely to be as dramatic as the pace of the interest rate increases. If you can make strategic changes to how you live your life while interest rates are high, you will reap the rewards when interest rates go down. With a little patience in the trajectory of interest rates and your own earning potential, you will build a life that is financially stable and immensely satisfying.