Rising Interest Rates Could Slow The Canadian Real Estate Market
Over the past decade much of the Canadian real estate market has experienced a high rate of inflation in the housing sector. This has been great for sellers as it has allowed them to cash in on the equity of their home and use that for other investment purposes, or as part of their retirement funds, or use the money to move up into something larger. It has also been good for buyers as they have been able to enter the real estate market, make some minor renovations to the property, then resell the house at a substantial profit and thus allowing them to climb the real estate letter fairly quickly.
The downside to this inflation of prices has meant that affordability for houses has suffered. In order to combat this interest rates have had to be lowered and continue to fall over the last number of years. We have some of the lowest interest rates ever recorded in Canadian real estate history. This trend looks like it will come to an end as interest rates are set to rise within the next few months. As this deadline looms many buyers have felt a sense of urgency to buy their home now especially if they are first-time homebuyers.
All this may result in a sudden surge of prices up until the point where interest rates climb to a level that negatively affects the affordability of a home due to the monthly mortgage payments. At that point we might see a fall or at least some kind of slowing in the housing sector.
