Interest Rates and Canada’s Housing Market

Interest Rates and Canada’s Housing Market – What’s going on?

Sunday Jan 30th, 2022


Low interest rates are making Canada one of the world’s hottest markets. But are low interest rates going to stay? And is it the right time to invest in real estate? These are legitimate questions, and as an expert in real estate investment I’m here to help you navigate uncertain waters.


For the past 12 years, the real estate market in Canada has been soaring. In the GTA, homes are more expensive than they have been, and the bidding war is very real. With low interest rates, many have taken out loans to put down payments and get the home of their dreams. The issue with some of these loans is that the rates can go up. The Bank of Canada may be expecting to lift the rate 0.25% to mitigate inflation with more rises to come in the next few years. If more than 1% rises, it could mean trouble for homeowners who still have to pay out their mortgages and can no longer balance the bill against their borrowing costs. The possibility is that there are more than expected hikes coming in the near future.


So, what does that mean for you? Well, if you can still afford your mortgage payment not much on the surface. But what happens is that when rates rise, not all are qualified to invest anymore, and investors are more and more likely to sell.


Investors now make up for a fifth of all the homes bought in Canada according to data from the Central Bank and since most investors see their properties as a source of profit, they can more easily sell off those homes. But that doesn’t mean investors are unharmed from the changing interest rates. The Bank of Canada has done research that shows that in the end of 2020, 40% of investors were breaking even. That means investors would need the prices to appreciate to earn wealth and may decide the investment isn’t worth it. If that happens, then more and more homes will be on sale – which changes the game.


There are differing opinions out there about what may or may not happen, and how much rates will rise if they keep on rising. Some believe it won’t rise to a level that does any harm, others think that even if it does rise, it won’t last. The question then becomes, ‘to take a variable-rate loan, floating-rate loan, a fixed mortgage or what?’ Is it time to sell, to invest, to lay low or to buy?


That’s where I come in. My forte lies in strategizing to maximize. I can help you make a plan based on your unique situation, taking into context your history, your current status and your goals. Contact me for a consultation so that we can work together to stack the odds in your favor.

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