Rising Interest Rates And Your Real Estate Investments

Canada’s economy is experiencing significant shifts. Last month, The Bank of Canada increased its overnight rate to 5%, the highest since 2001, during a period of persistent inflation. Inflation peaked at 8.1% and, although now trending downwards to 3.4%, it remains a hot topic. Rising service prices, linked to labour market tightness and rapid wage growth, are the current drivers of inflation.

How does this influence you as a homeowner?

High inflation generally means higher interest rates, affecting homeowners with mortgages and consumers with various debt forms. As interest rates increase, borrowing becomes more costly, which can lead to a cooling effect on the housing market by reducing demand for new mortgages. However, Canada’s housing market is experiencing robust consumption growth and persistent housing demand due to strong population growth from immigration.

Even though the housing market typically reacts to rate increases, it has shown resilience, with signs of picking up after a slowdown. The unexpected momentum can be attributed to the buffer of accumulated savings by many households since the pandemic began, which aids in supporting consumer spending.

Rising interest rates and inflation can seem intimidating, yet they are part of an economic cycle. Navigating these economic waves is manageable with accurate information and a good understanding of market trends.

Your home is not just a financial investment, but also a personal sanctuary that plays a role in your life’s story. These tough economic times can be challenging, and if you find yourself in a situation where you must sell your house due to increasing interest rates and inflation, we can offer compassionate assistance to help you get the best value for your home.