Why Canadian homeowners and buyers alike may start to feel the squeeze.
Homeowners across the country are grappling with inflation at nearly every checkout, watching their daily cost of living increase by 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 upcoming mortgage renewals and 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.
According to the Bank of Canada, approximately 10% of mortgages are variable-rate.
Variable rate mortgages that fluctuate with interest rates are all the rage.
According to the Bank of Canada, approximately 10% of mortgages are variable-rate. 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.
For those seeking to own a home in the near future, these interest rate hikes will undoubtedly 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 further rate increases will help lock in a number that feels comfortable for a set period, typically 90 to 120 days–often at little or no cost. This pre-approval provides potential buyers with peace of mind and fast tracks the process once a property is found.
Rising interest rates are increasing the cost of living every day.
Some recent or experienced homeowners may see their cost of living increase along with their mortgage payments and decide 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 when downsizing or making long-distance moves.
It’s not too late.
No matter your financial situation, you will feel the pressure of these rate increases. Although we can never be sure of what the future holds, especially in real estate, making the right financial decision for you as a homeowner or potential buyer can save you time, money and stress. If selling your home is the right move for you with these rising interest rates, BC House Buyer is here to help.