A new survey exposes balance sheet vulnerabilities for some Canadian homeowners amidst rising interest rates.

Released by BNN Bloomberg and RATESDOTCA, the survey found that 27 per cent of homeowners who participated have accessed a home equity line of credit (HELOC). Almost 80 per cent of those participants have used it, and half of them said they have done so in the last two years.

Aside from the pressure of increased interest rates, HELOCs are complicated by new real estate loan guidelines announced by the Office of the Superintendent of Financial Institutions on Tuesday. In late 2023, borrowers will be required to pay principal and interest on combined loans above 65 per cent of the property value.

Prior to these guidelines, HELOCs were an ideal way for homeowners to tap into their home equity during the prior decade’s low interest rates and high home prices, but the survey findings suggest that the Bank of Canada’s recent interest rate increases might have changed the way older Canadians leverage their home value. With HELOCs being based on variable-rate interest, borrowers will be hooked to higher payments.

Since HELOC lenders are able to demand full payment at any time, this can raise concerns for consumers who have not set aside extra money to pay down their HELOC amidst the pressure of rising interest rates.

According to the survey, 58 per cent of respondents said they have an outstanding balance on their HELOC.

Although the majority said they borrowed less than $50,000, 10 per cent said they borrowed more than $100,000. Balances of at least $50,000 were more common for Canadians aged 55 and older.

Of the 1,507 Canadians surveyed, 65 per cent said they were homeowners.

With files from BNN Bloomberg and RATESDOTCA