Of the roughly half a trillion Canadian dollars’ worth of variable mortgage debt outstanding, about a third have seen their monthly payments go up in line with the central bank’s benchmark rate, according to research from the National Bank of Canada. Combined with things like lines of credit and fixed-rate mortgages coming up for renewal, these rising interest payments could collectively shave 0.65% off Canadians’ collective disposable income over the next three years, the research shows.

“We are at risk of seeing a material slowdown in spending activity,” said Robert Kavcic, an economist at the Bank of Montreal. “We’re not technically forecasting a recession, but we’re very close.”

The alarm bells are perhaps ringing the loudest in Australia, where home prices in August recorded their largest monthly decline in almost four decades. While cashed-up households have so far shown resilience to rising interest rates, a pinch point will come next year, with billions in mortgage loans fixed at record-low interest rates coming up for refinancing. In Australia, fixed-term loans tend to be for a relatively short duration of two to three years.

That stands to hurt homeowners such as Sindhuja Vetcha, a 30-year-old architect who dipped her toe into the Sydney property market last May, hoping interest rates would remain at record lows. But as the price of everything from petrol to food surged, loan repayments for her two-bedroom apartment in Sydney’s west also started going up rapidly. She’s already paying A$260 ($178) a month more just for the 40% of the loan that was on variable term, and rates are tipped to rise still further.

At the same time, the value of her home has taken a beating — similar properties are currently being advertised for around A$70,000 less than she paid — meaning it will be a while before she is in positive equity again.

“It’s way beyond what the property will ever be worth any time in the near future,” Vetcha said.

--With assistance from Swati Pandey, Jana Randow, Shawna Kwan, Niclas Rolander, Neil Callanan, Ari Altstedter, Charles Daly, Konrad Krasuski and Prashant Gopal.

This article was provided by Bloomberg News.

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