Leftbank condos location. The Bank of Canada raised its benchmark interest rate. There are already some short-term signs that the Canadian real estate market is cooling, but some mortgage experts question the long-term impact of the move.Please Visit: Leftbank condos location to Get Your VVIP Registration Today!
“for the past two years, we have had spare money,” said Nasma Ali, founder of One Group, a Toronto mortgage broker and real estate agent.
Now that interest rates are climbing, the Bank of Canada raised its benchmark interest rate by 0.5 percentage points to 1% on Wednesday. For some potential home buyers, paying for these higher costs would be “a hard pill to swallow,” Ali said.
“now, people will look before they leap,” she told CBC News.
According to the Toronto Regional Real Estate Board, the average house price in the Greater Toronto area fell from $1.33 million in February to $1.29 million in March, contrary to the seasonal trend. Ali said she saw market prices fall and overall housing bids fell.
Although banks have raised interest rates on variable mortgages and credit lines, discouraging some potential home buyers from entering the market, Ali and other housing experts question the lasting impact of interest rates.
The rise in benchmark interest rates is the biggest in nearly 20 years in an effort to curb soaring inflation. But the rate is still lower than it was before the pandemic. In March 2020, after the first outbreak of COVID-19, the Bank of Canada cut interest rates to just above zero.
“the latest rate hike will have a cooling effect.” Said James Laird, president of Canwise Financial and co-founder of Ratehub.ca. This is not the only factor affecting the market, he added.
“We have a lot of new immigrants. They want to buy a house. There are still supply problems. ”
However, both Laird and Ali warn that house prices may fall, but buyers will pay more interest on monthly mortgages.
Ali says this is likely to have the greatest impact on first-time home buyers.
Dustan Woodhouse, president of Mortgage Architects, a Vancouver-based brokerage, points out that continued interest rate hikes will not affect most people who already own homes because most of them have fixed interest rates.
“all this uproar about raising interest rates doesn’t really make much sense,” he said. ”
Woodhouse believes that raising interest rates will not prevent most first-time buyers from entering the real estate market, if they can afford it.
“this is not a level playing field,” he said. “but the reality is that while detached housing has become the exclusive domain of the upper-middle class, there are enough people in this class, and the market is stable and strong relative to housing supply.”
In essence, higher interest rates will not stop those who have passed the mortgage stress test and are able to pay the down payment, Woodhouse said.
But he says this could limit what buyers can spend in other areas.
“this may mean that there will be fewer bookings at high-end restaurants on Friday night, and they will not go out for $150 dinner three times a month. Maybe it will be reduced to twice, maybe only once. “