Daylyn Smolenski had to give up a lot when he was looking to buy a home.
The 22-year-old wanted to put his name on a property a few years ago, but he put that on hold — and it cost him.
“The pre-approval process was completely different, and what I was pre-approved for a couple of years ago is not anywhere close to what I was pre-approved for now,” he said.
The Bank of Canada bumped its interest rate a quarter of a per cent to 1.75 on Wednesday, putting more pressure on those looking to borrow money for big purchases.
This is the fifth hike since last summer, and realtors have noticed a big difference in Lethbridge’s housing market.
“We’re seeing, I would say, a 20-per-cent increase in the number of people that can’t get financing, even after they’ve been pre-approved, written their offer (and) they’ve gone out and seen properties. So certainly a lot more in what we say in the industry ‘crashed deals’ compared to years prior. We’ve not seen anything like this,” said realtor Courtney Atkinson.
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An Equifax Canada report released in March said the average Canadian debt balance sat around $22,000.
Higher levels of debt can play a role in the pre-approval process, and experts say higher interest rates limit the average person’s amount of disposable income.
“So things like going out for dinner they may have to do that less. They may have to take less holidays,” said Ebenezer Asem, a finance professor at the University of Lethbridge.
Some local car dealerships haven’t seen a big impact on their customer base.
“The payment bump is slight. It depends on how big of a purchase you’re making. We see some people opting for longer terms, that type of thing. But I think, other than that, we haven’t seen any great changes,” said Paul Yerbury, financial services manager at Truck Town.
But for people like Smolenski who are looking for their first home, the interest rate is limiting affordability, square footage and location.
“It’s just sacrifices that you need to make now to get into ownership. I think most new homebuyers are going to have to deal with something like that and make some sort of sacrifice just to get into their first home,” he said.
More increases could be on the way, with the central bank estimating the rate could rise to three per cent.