Homeowners, particularly those with variable rate mortgages, are in for another dose of financial pain after the Bank of Canada raised interest rates for the third time this year, bringing its benchmark rate to five per cent.
Rate hike to squeeze homeowners, put pressure on house prices
Dated: July 18 2023
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People with variable rate mortgages to be hit hardest, experts say
In its press release on July 12, the Bank of Canada acknowledged the strength of the economy. “Canada’s economy has exceeded expectations, displaying a robust demand momentum,” the bank said, further emphasizing strength in the housing market, in which demand has outpaced new construction and new listings, leading to upward pressure on prices.
Laird predicted the interest rate hike will have a dampening effect on home prices. “This hike will put downward pressure on home prices and cause transactions to slow over the summer,” he said.
For example, someone with a $700,000 mortgage and a three per cent interest rate would have been paying $3,300 a month. Their monthly payments would now go up to $4,600 with a 6.3 per cent interest rate.
Matt who has five properties with a combined 17 rental suites. Four of his mortgages are on variable interest rates, which means his mortgage payments have increased by at least $4,000 a month.
The more expensive borrowing costs don’t only hurt homeowners, he said, but will trickle down to tenants by way of more expensive rent.
“What needs to be highlighted here are these rate increases aren’t just impacting landlords and homeowners,” Eide said. “Eventually that also hammers the tenants as well.”
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