<img src="https://blog.remax.ca/wp-content/uploads/sites/8/2022/06/Rising-interest-rates-and-housing-market.jpg"> The Bank of Canada (BoC) has <a href="https://blog.remax.ca/bank-of-canada-makes-latest-interest-rate-announcement/">said</a> it will be use its monetary policy to tamp down inflation, which currently sits at a 30-year high, joining the chorus of central banks worldwide trying to grapple with the rapidly escalating cost of living. So far this year, the BoC has already moved forward with rising interest rates three times, and Governor Tiff Macklem is preparing the financial market for more quantitative tightening in upcoming policy meetings.But while the objective is to garner a stranglehold on a surging consumer price index (CPI) and producer price index (PPI), rate hikes will lead to financial pain for borrowers, investors and homebuyers.Indeed, the <a href="https://blog.remax.ca/canada-housing-market-outlook-to-2027/">Canadian real estate market</a> is seeing the effects of a rising-rate environment. According to the <a href="https://creastats.crea.ca/en-CA/">Canadian Real Estate Association</a> (CREA), in April, national home sales tumbled 12.6 per cent month-over-month. The national average home price was about $746,000, down a tepid 0.6 per cent month-over-month.“After 12 years of ‘higher interest rates are just around the corner,’ here they are,” said Shaun Cathcart, CREA’s Senior Economist, in a statement.Now that Canada is waving goodbye to the era of historically low interest rates, what do homebuyers and owners need to consider in a post-pandemic economy where rates are on the rise?<h2>Things To Consider in the Face of Rising Interest Rates</h2>Here’s what buyers and sellers need to consider in a rising interest rate environment:Selling Soon?If you are thinking about selling your home soon, work closely with your real estate agent to determine if higher borrowing rates may impact your listing price. Do you need to under-price the home to generate attention, or should you list it at its appraised value? Whatever your strategy, some markets have shown signs of moderation, so you may not see the same <a href="https://blog.remax.ca/how-do-you-buy-a-home-in-a-sellers-market/">frenzy</a> that became the norm during the last two years.Are You Pre-Approved?With interest rates on the rise, it is more important than ever to <a href="https://blog.remax.ca/5-reasons-why-you-should-get-pre-approved-for-a-mortgage/">get pre-approved for a mortgage</a>. This allows buyers to lock in at the current rate while you shop for a home and ensure that you enjoy some level of protection against near-future interest rate increases. Also, by having a pre-approved mortgage, you can take comfort in knowing how much money you have to work with during the home-buying process.No More Frenzy?Suffice it to say, now that rates are increasing the flurry of demand seems to be waning somewhat, with fewer buyers competing for the limited number of homes on the Canadian real estate market and fewer bidding wars. Instead, buyers may be able to calmly negotiate prices and come to reasonable terms and conditions with the seller, such as critical <a href="https://blog.remax.ca/buyers-forgoing-home-inspections-in-competitive-ontario-housing-market/">home inspections</a> and property appraisals.Stress Test Your BudgetCan you afford a higher mortgage payment in five years, when it’s time to renew your mortgage at a higher interest rate? Both buyers and sellers need to consider this in today’s rate normalization since greater borrowing costs could add financial pressures to your monthly household budget. Plan ahead and <a href="https://blog.remax.ca/what-is-the-mortgage-stress-test-in-canada/">stress test</a> your budget.<h2>Waiting for a Crash or a Correction?</h2>Now that Canada is moving on from the pandemic-era near-zero interest rate era, does this mean the housing market is in store for a crash? Not exactly, says Robert Hogue, the senior economist at RBC.“We think the sizeable drop in activity in April marks a turning point for the Canadian market with further cooling on the way. The Bank of Canada’s setting out to aggressively normalize its monetary policy is a game-changer for the market—turning what has been a tremendous tailwind into a stiff headwind for the market,” he wrote in a <a href="https://thoughtleadership.rbc.com/canadas-housing-market-taps-on-the-breaks-as-interest-rates-rise/">research note</a>.“After a nearly two-year-long frenzy that propelled property values to the stratosphere in many parts of the country, a calmer outlook for the market should be welcome news. We expect the burgeoning price correction seen in Ontario and parts of British Columbia to deepen and spread to other markets as market sentiment sours, but it’s unlikely to morph into a meltdown.”Suffice it to say, it is doubtful that a market like Toronto is going to eliminate all of its COVID gains.<h2>Lots to Consider in 2022 – and Beyond</h2>Indeed, there will be many things to think about in the Canadian real estate market moving forward, from mortgage rates to housing supply levels. While prices are elevated and are expected to remain that way until more inventory comes on stream, this might no longer be the red-hot housing sector we’ve become used to these last two years. Conditions seem to be stabilizing, the market is adapting to interest rates, and buyers and sellers may be rational again. Whatever happens, the next few years will be interesting!

Things To Consider in the Face of Rising Interest Rates

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Although the Canadian annual inflation rate has eased from its 30-year high of 8.1 per cent in August, officials conceded that this was driven mainly by gasoline prices. The national economy endured “a further broadening of price pressures, particularly in services.” As a result, “the policy interest rate will need to rise further,” and additional tightening was on the horizon to ensure price stability.“Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further,” the BoC said in a <a href="https://www.bankofcanada.ca/2022/09/fad-press-release-2022-09-07/">statement</a>. “Quantitative tightening is complementing increases in the policy rate. As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the two-per-cent inflation target.”Now that rates are normalizing from their pandemic-era lows, borrowing costs are increasing for credit products and services. Of course, this also means higher returns on bank deposits.But many buyers and homeowners have a major question: What about mortgage rates? <a href="https://rem.ax/3UkZhd3?fbclid=IwAR25ycGqVxOs9TpoFXGSIQTk7LGXTqDDvxuYvCknKzsq0ZydLRE15uVP59g">https://rem.ax/3UkZhd3</a>

Are Higher Fixed Mortgage Rates are here to Stay?

I am a native Hamiltonian who has been working as a full-time, full-service Realtor through-out my Board area since 1989. My focus is on selling residential re-sale and condominium properties. Primarily, my business is comprised of repeat and referral business.For the first 18 years of my real estate career, I was licensed with a large independent firm and generally ranked in the top 5 salespeople there. In 2007, I moved to Re/Max Escarpment Realty Inc., the largest real estate firm in my Board area. My clients have benefited greatly from this move as the Re/Max brand and systems are second to none! My background is in Executive Secretarial and Public Relations positions in Banking and Credit Unions prior to entering real estate. Currently serving on the Board of Directors for a local condominium building, I also have extensive experience in Condominium sales. Over the years, I have donated my time to Heart &amp; Stroke, United Way and Meals on Wheels.I am not part of a team and will be most pleased to assist you personally with your real estate needs!<a href="http://www.janicejames.com/" target="_blank" class="btn">JaniceJames.com</a>

Janice James