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Real Estate Market Update: Interest Rates

08.18.2017 | Real Estate Market

On July 12th, the Bank of Canada raised the key interest rate to 0.75 per cent (up from 0.5 per cent). In combination with the Ontario Fair Housing Plan, which we detailed here, this recent increase is of equal importance to buyers (especially first-timers), sellers, and those who are currently holding mortgages. But, what does it all mean?

Here’s what the recent rise in interest rates could mean for the market – and for you. This is your real estate market update…

Impact on Owners 

The Bank of Canada hasn’t raised interest rates in 7 years, so any increase is bound to send shockwaves throughout the market. As was noted in the initial press briefing, adjustable-rate mortgages and home equity lines of credit will be immediately impacted. While it may not mean a huge increase to monthly mortgage payments, it could tighten the purse strings on owners who are already trying to keep up as it is.

Impact on Buyers

We have continued to see a cooling off period for the market, which we also detailed here, and these developments could prolong that period. Buyers might feel hesitant to purchase during the “height” of the market, especially as prices continue to remain steady. First-time buyers, particularly, could be worried about “locking into” mortgages that they cannot yet afford. Ultimately, this skepticism leaves houses on the market for longer, as buyers continue to proceed with caution.

Impact on Sellers

According to the Canadian Real Estate Association, sales between April and June dropped by about 14 percent. But, they’re still higher than this time last year (6.3 per cent). Prices have continued to climb, although with a little bit of a chill, but it seems that a large decline is not on the horizon.

Homes might be on the market for longer, as buyers remain cautious about purchasing, but a large dip in sale prices is unlikely. Right now, it’s more about buyer confidence, rather than finances. Buyers don’t want to feel like they’re wasting their money when they can just “wait out the storm.” An increase in interest rates won’t change this attitude.

At Home and Abroad

The fact of the matter is that these recent measures are looking to bring the market back down “to normal levels” with domestic and international efforts. First, we have an effort to curtail resale activity with rising interest rates, while a tax on foreign buyers should reduce the incentive for speculators in the Toronto market.

Conclusion: Your Real Estate Market Update

The most important thing to note is that the market is unpredictable, and it’s hard to tell how long these changes will hold influence. Moving forward, drastic changes are unlikely, and the “new normal” of high prices still reigns supreme for both buyers and sellers. When it comes to your real estate needs, the best thing you can do is to go with an expert.

For 30 years, our clients have trusted us to minimize risk, offer unbiased opinions, and ensure their best interests are served. We can do the same for you. Contact our team today to talk about your needs by emailing us at or calling us at 416-441-2888.

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