July Interest Rate Increase

Jul 13

The Bank Of Canada has raised policy rates by another 25 basis points which increased the overnight target rate to 5%. We spoke with John Haddad about what this means for the market in Ottawa.

In recent months, there has been a lot of talk about interest rate hikes and their potential impact on residential home prices. Many would assume that as rates increase, home prices would naturally decrease. However, the reality is a bit more complex.

The Recent Trends:

Over the past couple of months, we have witnessed some interesting developments in the real estate market. Despite the interest rate hikes in May and June, the average price of residential homes showed a slight increase. In May, the average price was $746,082, while in June, it rose to $746,445. Similarly, condos experienced modest growth, with prices moving from $442,859 in May to $448,380 in June.

Understanding the Dynamics:

At first glance, this may seem counterintuitive. After all, shouldn't higher interest rates lead to lower home prices? While there is some truth to this concept, we must consider other factors at play, particularly supply and demand dynamics. The supply of available homes is currently not meeting the high demand from consumers. This scarcity in the housing market is driving prices up, offsetting the impact of interest rate increases. People still need a place to live, and their confidence in the market remains strong.

Predicting the Future:

It's important to acknowledge that predicting the future of interest rates and home prices is an elusive task. Unless you possess a magic crystal ball, there is no surefire way to know how these variables will pan out. Rather than fixating on uncertain predictions, it is crucial to focus on what you can control: your actions in the present.

Taking Action:

If you are considering entering the real estate market, it is wise to consult with a mortgage advisor. They can provide valuable insights into the available interest rates and guide you in formulating the best plan of action for purchasing a home. While the headlines may be filled with sensationalized information, it is essential to conduct your due diligence and seek advice from professionals in the field, such as Realtors and Mortgage Advisors. By doing so, you can gain a comprehensive understanding of the market and leverage today's prices to your advantage.

The relationship between interest rates and home prices is more nuanced than it may initially appear. Although interest rate hikes would typically indicate a decrease in home prices, the current supply and demand dynamics in the real estate market are counteracting this effect. Therefore, it is crucial to focus on the present and make informed decisions based on professional advice. By consulting experts and conducting thorough research, you can navigate the real estate market confidently and find the best opportunities that align with your goals. Don't let the headlines scare you—empower yourself with knowledge and take advantage of the opportunities available in today's market.