Last week, the Bank of Canada announced an increase in interest rates by 50 basis points. This is the second increase of the year but not expected to be the last. As interest rates rise, so does the stress test qualifying rate which is two percentage points higher than the actual rate of a mortgage.
What Does This Mean for Buyers Who Have Already Secured a Pre-Approval or are Planning to Do So?
- Pre-approvals are valid for four months, meaning if you secured a pre-approval at the end of 2021 or the beginning of this year, you could still buy a home this spring at your pre-approved, lower interest rate. Great news!
- Buyers that have thought about getting pre-approved but have not yet, should consider doing so now. As the interest rate is expected to continue to rise, it will become more difficult to secure a larger mortgage in the coming months.
- For each percentage point the interest rate increases, Canadians will qualify for an approximately 10% smaller mortgage, but there is still time to get pre-approved before rates are increased again.
- Calculate your potential mortgage pre-approval and monthly payments now using our mortgage calculator which features some of the lowest rates available across Canada.
Inventory is Increasing and Price Growth is Slowing Across Canada
Many are counting on the rising interest rates to be a major factor in cooling the housing market, causing downward pressure on home prices. We have seen some lower home prices month-over-month across many Canadian cities following the historic highs in February 2022. As inventory is growing in many cities, analysts believe this could be leading to a more balanced market.
If you’re considering buying a home this spring, contact us to talk to an agent and receive a free consultation.