Interest rate hike won’t cool housing, say experts

Housing experts say prospective homebuyers hoping today’s interest rate hike will cool the country’s heated real estate market will likely be disappointed.

They believe pent-up demand for homes is so high and supply still so scarce that the Bank of Canada’s decision to hike the rate to 0.5 per cent from 0.25 per cent won’t take much of an edge off the real estate market.

Toronto broker Michelle Gilbert says her clients aren’t letting the rate hike deter them from buying because they’ve lived through years of home price increases and interest rates are still lower than they were pre-pandemic.

Gillbert says clients want to get into the market while they can, and they won’t find better conditions until there’s a significant rise in supply or investors are required to cover higher down payments, deterring them from buying.

Gilbert’s views are bolstered by a Zoocasa analysis showing the country’s last round of interest rate increases between the start of 2017 and end of 2019 correlated with slower sales numbers, but triggered no major impact on prices.

The listings site found after those rate hikes there were “very small movements” in the average price, which could be attributed back to seasonality and the new mortgage stress test rather than the rate increase.


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