Real Estate Blog - Bank of Canada

How Will Higher Interest Rates Impact My Mortgage?

How will higher interest rates impact my mortgage? It’s a question more homebuyers and homeowners are asking, in the wake of the Bank of Canada’s recent interest rate hikes. We consider many variables in life before making any big decision, and one of the most important ones to think about when buying a home is the current state of interest rates. While a low interest rate is desirable for a prospective buyer, as it means they have more purchasing power, lower rates may not be all they are cracked up to be.

Interest rates fluctuate. They rise and fall in response to the economy and world events, and can significantly impact the amount you pay for your home over the lifespan of your mortgage.

Typically, mortgage loans are…

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Inflation and Real Estate - What You Need to Know

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In recent years, it’s likely you’ve heard the media, your colleagues and even politicians speak about “inflation.”

You also may have noticed prices for regular everyday items including food, gas, or larger purchases such as homes, furniture and vehicles have risen sharply since the start of the COVID-19 pandemic.

Up until a few months ago, when government officials and the media spoke about the current rise in inflation, they often defined it as “transitory”. Now, officials at the Bank of Canada are stating inflation may actually be more persistent, and have signaled the future path for Canadian interest rates may be a series of rate hikes to help bring inflation back down to within its target range of 1% to 3%.…

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Rethinking a Variable Rate Mortgage in the Face of Hikes

For a long time, it was a common ideology that a variable rate mortgage was ideal when purchasing a home. The thought process was based on the theory that if the rate drops, you’ll be able to reap the benefits of lower interest payments as opposed to someone who is in a fixed-rate mortgage.

Before we get into the nitty-gritty of it, let’s review how interest rates impact a mortgage and the difference between a fixed-rate and a variable-rate mortgage.

Interest rates are determined by the Bank of Canada and often reflect the state of the economy. When the economy is strong, interest rates are high. This means that borrowing money would cost more, but you should receive a higher payout on your investments. When the economy…

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Q&A: Senior Economist Answers Common Real Estate Questions

Between rising interest rates, the COVID-19 pandemic, and the incoming spring market, home buyers and sellers might feel slightly overwhelmed by all of the changes happening in the 2022 housing market. 

Last year was one for the books as home inventory sank to its lowest levels ever recorded. Meanwhile, the Bank of Canada (BoC) is preparing to increase its overnight rate again, spelling potential changes for new and existing mortgage holders. With these trends in play, it leaves a lot of questions for those looking to make a move in the real estate market in 2022. 

Shaun Cathcart, Senior Economist and Director of Housing Data and Market Analysis at the Canadian Real Estate Association (CREA), has the answers to some of your important real…

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Bank of Canada Increases Interest Rate

Photo by Alex Shutin on Unsplash

On March 2, 2022, the Bank of Canada began its rate hike cycle by increasing its target for the overnight lending rate by 25 basis points to 0.5%. The Bank will also be maintaining its portfolio of government bonds until it is deemed necessary to start reducing the overall size of its balance sheet.

The Bank views the Russia-Ukraine conflict as major source of uncertainty, that which has led to increases in oil and other commodity prices, stoking further global inflationary pressures, and likely causing a drag on global growth. Amidst these recent geopolitical developments however, the global economic recovery to date has so far turned out to be in line with the Bank’s projections, with some advanced economies even…

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Canadian Real Estate Markets Have Seen A “Typical” Home Increase Up To $400,000

Canadian real estate prices are soaring at the fastest pace ever, yet the national numbers downplay growth. Canadian Real Estate Association (CREA) data shows home prices continued to soar in December. Over just 31 days, a “typical” home added up to $40,000 in one market. Over the past year, prices have increased more than ten times that monthly surge.

A Typical Home Across Canada Increased $16,700 Last Month

Canadian home prices are rising at one of the fastest rates ever. The composite benchmark (a.k.a. a typical home) reached $798,200 in December, up 2.1% ($16,700) compared to a month before. The benchmark is now a whopping 26.6% ($167,500) higher than last year. Both are large gains, but this is the index — many markets outperform even…

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How High Will The Bank Of Canada Hike Rates?

Canadians have never had so many monetary policy questions, especially homebuyers. Our crystal ball is in the shop, so we can’t tell you what interest rates will be. However, we can do the next best thing — present you with the Canadian Overnight Rate Sentiment Index. We polled the country’s top economics and finance experts for their Bank of Canada (BoC) forecast. We then de-biased it by disassociating the expert’s name, and plotted the forecasts. While we can’t tell you the future (yet!), we can help you understand where the best of the best see things heading. 

A Quick Note On Forecasting

It might seem obvious what a forecast is, but it’s worth repeating for those who don’t work with them regularly. A forecast estimates a future…

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Bank Of Canada Policy Is “Too Loose,” Rate Hikes Will Reduce Real Estate Froth: BMO

Canada’s monetary policy is too loose, and tightening is the simplest way to correct it. That’s the gist of the latest research note from the Bank of Montreal (BMO). Senior economist Robert Kavcic notes the current market is more frenzied than anything else in Canadian history. He sees Ottawa using a rate hike to cool it, which will help reduce demand. By reducing demand, he sees the market froth easing.

Canadian Home Prices Are Accelerating At A Rapid Rate

Today’s Canadian Real Estate Association (CREA) data shows soaring home prices. As stated earlier, the price of a typical home is now 26.6% higher than last year. It’s hard to believe, but recent growth has been even faster than usual. According to the bank, the 1, 3, and 6-month annualized…

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Bank Of Canada Quietly Updates Real Estate Affordability Data To The Worst In 13 Years

JANUARY 11, 2022

Canada’s central bank quietly updated its real estate affordability index. It wasn’t good news. The Housing Affordability Index (HAI) made a big jump in Q3 2021. Maintained by the Bank of Canada (BOC), the HAI shows the share of income required to service a mortgage on a home. Low rates are no longer helping affordability, but fueling prices that outpace wages. As a result, affordability has now reached the worst level since the Great Recession.

The Bank Of Canada Housing Affordability Index

The BoC Housing Affordability Index shows the share of income needed for housing costs. More specifically, the share of disposable income an average family would use. Housing costs are defined as mortgage payments and utilities.…

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Canadian Housing Market Trends to Watch in 2022

The Canadian housing market has been a fixture in media headlines and an ever-present topic of conversation around dinner tables and water coolers by those who continue to work in an office setting in the wake of COVID-19. Early on in the pandemic, some expected a steep decline in home sales and prices in Canada, but nobody could have predicted what actually materialized in the market. Come May 2020, regional real estate markets began their rebound. The spike in demand continued through 2021, resulting in record-breaking price growth and what many would consider to be the hottest year in Canadian real estate. So, what can we expect in 2022? Here are five trends to keep your eye on.

Interest rates are expected to rise.

…

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