Wednesday’s benchmark rate hike by the Bank of Canada will no doubt impact a lot of people in the Okanagan, especially those with variable-rate mortgages and lines of credit.
However, the hike is expected to help normalize what’s been a home-buying frenzy.
On Wednesday, Canada’s benchmark interest rate jumped for the third time this year, by 0.5 per cent to 3.7.
It’s a hike that Royal LePage realtor Melissa McAfee said will balance out the market and allow people to buy homes the way they’re intended to be bought.
“People are able to do their due diligence again and do inspections and do all the proper stuff that we like to do,” McAfee told Global News. “It’ll actually be a good thing.”
After booming for more than two years, the Okanagan real estate market has cooled slightly. And some believe the latest Bank of Canada hike could slow things down even more.
“The market has slowed a little bit with the pressure of the rates, because we’re starting to have clients that are depending on what they’re looking for, maybe they’re not wanting to pay as much, said Chris Kolisnyk, one of the owners of family-owned B.C. Direct Mortgages in Kelowna.
The latest increase is bound to cause concern among many Okanagan residents.
“Absolutely. Nobody likes rising rates. I mean, rising rates mean more money out of your pocket, right?” said Kolisnyk.
“And that means that your monthly payments are going to go up. So it just puts a little bit more stress on that cost of living.”
Kolisnyk said those with a variable rate mortgage will be the ones most impacted by the increase, as their mortgage payments will suddenly go up.
Depending on the size of that mortgage, Kolisnyk said it could be significant.
“If somebody has a small mortgage, you’re probably going to see an increase of a few hundred dollars per month on that,” Kolisnyk said.
“But if somebody has a larger mortgage, $500,000, $600,000, $700,000 it could be substantial as a monthly payment increase.”
While the latest hike should not have a major impact on who qualifies for a mortgage at this point, experts say that could change if the prime rate continues going up.
“We’re still seeing the stress test at 5.25 per cent with a lot of variable-rate mortgages,” Kolisnyk said.
“But that being said, if prime continues to rise, we’re going to see that a little bit harder now for qualifying, because now your rate is going to be impacted by the stress test rules, where it’s your going rate plus two per cent.”
Something that is likely coming as the Bank of Canada hints at more hikes in the months ahead.
“Every rate hike, you’re going to have somebody may be qualifying for $20,000 and $30,000 less and then again,” Kolisnyk said. “So it can start to take a toll on the market.”
As for what this may all mean for home prices, McAfee said it’s hard to predict, especially in a highly attractive place like the Okanagan.
“Maybe, but it’s hard to say, they may not, too,” McAfee said. “That’s the reality of the Kelowna market.
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