Housing costs in the Okanagan are already among some of the highest in the nation, and the latest interest rate hike by the Bank of Canada will make homeownership even more costly.
The central bank raised its key interest rate by half a percentage point on Wednesday, increasing it to 3.75 per cent. The move marks the sixth consecutive rate hike this year.
“With the price of housing here, (the interest hike) just makes it so much more difficult,” said Nikki Harrison, a mortgage broker with The Mortgage Group (TMG).
“It’s drastically affecting everyday people. This isn’t just, you know ‘Oh, well, you know, rates are going up, whatever.’ It’s actually impacting people’s lives … making it either you get the house that you want, or you don’t.”
With prime rates set to increase as well, passing the mortgage stress test will become even more difficult.
Introduced in 2016, the stress test involves two per cent added to the bank rate as a qualifying factor.
“That’s just astronomical and people are not qualifying for that anymore,” Harrison said.
“So I’m seeing buyers just retreating and going ‘You know what? We’re going to keep renting until rates go down again.'”
While overall inflation slowed to 6.9 per cent last month, it’s far from the target of two percent to let supply catch up to consumer demand.
Inflation and central bank interest hikes have a lot of British Columbians reaching out for help in managing their debt.
The Credit Counselling Society, a not-for-profit organization, has seen a 10 per cent increase in requests for help every month in the past year.
“We’re seeing over 1,000 additional clients each month coming to us,” said Scott Hannah, president and CEO of Credit Counselling Society.
As a result, the organization had to hire additional staff to help with the increased demand for support.
“Typically, in the past, when someone was starting to experience financial difficulty, they would contact the organization and look to schedule an appointment to meet with one of our counsellors,” said Hannah.
“Today, they’re looking for immediate guidance. So we’re seeing a pent-up increase in urgency amongst consumers as a result of inflation and these rate hikes.”
Hannah added many people are relying on credit cards to get by, which only adds to their debt load.
He said thoughts of worst-case scenarios are also adding to the financial stress.
“That’s the biggest worry. Am I going be forced to sell my home because I can’t afford it? And then what then? Because rental prices are equally high,” Hannah told Global News. “So there are no easy solutions here.”
Hannah said for those seeking financial stability, the best thing to do is consider ways to reduce daily expenses.
“Can they work from home to reduce transportation costs? What other things can they do to reduce their costs, and are there other opportunities for them to increase their earnings?” he said.
“Do they have to get a side job, do they have to make some difficult choices and perhaps go down from a two-car family to a one-car family?”
As the costs of borrowing money go up, mortgage brokers are reminding the public that the sudden increases are shocking because they’re higher than what people have become accustomed to.
“Over the last few years, with interest rates at historical lows, I think a lot of the population got spoiled,” said Harrison, adding the current rates are not unprecedented.
“These are pretty midline average rates, there’s nothing exceptional or high about them,” she said.
“All of us over the age of 40, 45, we’ve all had mortgages at 5.5, 6.0, 6.5 per cent, so we have these generations now that have never seen this before because they weren’t adults. They’re all just freaking out, going ‘Oh my gosh, this is terrible. The whole world is imploding.’
“And it’s not.”