Wednesday’s 100 basis point hike to the overnight interest rate brings the total increases this year to 2.25%. This will understandably have a profound impact on housing prices.
The monthly payments to purchase the same home in January compared to today are up $1,100, or 52%. The rising rates have already seen around a 20% decline in prices in the GTA, and here in Vancouver, around 11%.
The full effects of the recent rate hike have yet to be felt. Plus, current indications are that rates will be raised to 3.75% by year end, adding another 1.25% before the Bank of Canada levels off.
The word Recession has become predominant recently, though the robust job market is doing its best to hold it at bay. June produced the lowest employment rate in recorded history, coming in under 5% for the first time ever.
There is no question property prices are going to go lower in Vancouver – current estimates point to 15% HPI. With the cost of borrowing up, this isn’t making homes more affordable, as monthly payments for the lower price home are as high as the higher priced home with lower rates. Cash buyers are the real winners here.
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