Homeowners across the country are grappling with inflation at nearly every check out, watching their daily cost of living increase over 7% from 2021. With these rising costs, many are wondering what the future holds for homeowners and buyers in Canada. The Bank of Canada has recently raised interest rates, which will have a financial impact on those with variable rate mortgages or those with upcoming mortgage renewals, as well as those looking to get into the real estate market. According to an Ipsos poll, nearly 30% of Canadians cannot afford to pay their bills and meet their debt payment obligations. Homeowners with variable rate mortgages will see their payments increase, while new buyers looking to find their forever home will be met with higher mortgage payments from the start.
Variable rates
According to the Bank of Canada, approximately 10% of mortgages are variable rate mortgages. These homeowners who may have gotten into the market during the pandemic at record low rates will have seen their payments increase overnight. For those who may have stretched themselves financially to attain these homes, a viable option would be to speak with your financial advisor or lender about locking yourself into a fixed rate mortgage before any further rate increases–although this won’t have an immediate effect on debt management.
Pre-approval
For those who are seeking to own a home in the near future, these interest rate hikes will certainly hurt their ability to secure a mortgage at an affordable rate, or they may find themselves unable to borrow as much as they would have been able to in recent months. For these individuals, getting pre-approved before any potential further rate increases will help lock in a number that feels comfortable for a set period of time, typically 90 to 120 days–often at little or no cost. Having this pre-approval not only provides potential buyers with peace of mind, but fast tracks the process once a property is found.
Cost of Living
Some homeowners, recent or experienced, may see their cost of living increase along with their mortgage payments and make the decision to downsize or relocate to a more affordable area. For those people, a private sale option may be in their best interest to ensure a quick closing, savings on realtor commissions and the ability to leave what they don’t want, especially in the situation of downsizing or making long distance moves.
No matter your financial situation, you will feel the pressure of these rate increases. Although we can never be certain of what the future holds, especially in real estate, making the right financial decision now for you as a homeowner or potential buyer can save you time, money and stress in the future. If selling your home is the right move for you with these rising interest rates, BC House Buyer is here to help.
Leave a Reply