{"id":20211,"date":"2022-10-12T09:33:06","date_gmt":"2022-10-12T13:33:06","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=20211"},"modified":"2022-10-12T09:33:07","modified_gmt":"2022-10-12T13:33:07","slug":"impact-on-buying-power","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/impact-on-buying-power\/","title":{"rendered":"Home Prices are Down but Interest Rates are Up. What is the Impact on Buying Power?"},"content":{"rendered":"\n

Home prices in Canada are dropping but borrowing costs are snowballing. The inflation correction initiated by the Bank of Canada has led to five interest rate increases<\/a><\/strong> to date and the next announcement is scheduled for later this month. Although these interest rates have caused downward pressure on home prices<\/a><\/strong> in many cities across the country, the growing cost of borrowing means Canadians are qualifying for less when stress-tested. Some prospective buyers are trying to time the market and planning to enter when home prices dip another X%, but are rising interest rates the true culprit here?<\/p>\n\n\n\n

Here\u2019s How the Stress Test Determines What You Can Afford to Borrow<\/h2>\n\n\n\n

When a buyer wants to take out a mortgage, the lender will \u201cstress test\u201d the buyer. This process ensures that the buyer can afford the amount borrowed even if at renewal the interest rate has risen. In the case of a variable mortgage, it\u2019s to ensure that if your monthly payment fluctuates, you\u2019ll be able to afford it at its peak. To determine your qualifying rate, a lender will stress test you against current rates plus 2%. Today, the average fixed rate is roughly between 5 – 6.14%, depending on the lender. <\/p>\n\n\n\n