En françaisWhat do the interest rate increases mean for the housing market?After holding borrowing costs to record lows during the past two years, the Bank of Canada is working on increasing
What do the interest rate increases mean for the housing market?
Dated: May 4 2022
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What do the interest rate increases mean for the housing market?
After holding borrowing costs to record lows during the past two years, the Bank of Canada is working on increasing the interest rates to normal levels to keep inflation in check.
In March, the Bank of Canada raised its benchmark interest rate for the first time in two years. The 25-basis point increase was followed by a second one in April, but this time by half a point. This represents the highest increase in the last two decades, and Canadians have been warned that more hikes are to be expected in the months to come. Indeed, the governor of the Bank of Canada, Tiff Macklem, is signalling the interest rate could go up another 50-point basis in June as the target is to get the policy rate back up between 2 and 3%.
What do these increases mean for the housing market? Even though the home resale activity is projected to slow down, maybe more quickly than previously anticipated, reports the economist Robert Hogue, prices are expected to peak in Spring. Also, the higher rates may reduce the amount homebuyers can borrow and the price they can pay, thus reducing their buying power.
If you would like to know how the rate increases will affect the sale or purchase of your home, or your capacity to qualify for a mortgage, give us a call. We will guide you through the necessary steps to create the right plan for you according to your circumstances and the market conditions.
613-707-5146
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