The Bank of Canada’s sixth consecutive interest rate hike this year is pushing the dream of home ownership further away for many Montrealers.
Élyse Gamache-Bélisle has been collecting refundable aluminum cans for years.
She’s not delusional in thinking it will ever be enough to afford a down payment — the tenant in Montreal’s Villeray district also has savings and a well-paying job in the high-tech sector.
But the single mother of two fears increasing interest rates is delaying her dream of home ownership.
“Even if I have the money to buy, to have the down payment, it’s getting really hard to afford the price with the interest each month, so it’s pushing away my dream,” Gamache-Bélisle told Global News.
On October 26, the Bank of Canada raised its benchmark rate to 3.75 per cent. Most major banks followed, increasing their prime lending rates to 5.95 per cent.
“It’s really, really discouraging,” she said.
The higher cost of borrowing to pay off a mortgage is having a ripple effect on the housing market.
”It’s a significant increase in that monthly payment,” Sean Broady, a real estate broker at Broady Windsor Group, told Global News.
He says sales of single-family homes have slowed largely due to rising interest rates.
”A lot of people who may have thought of upsizing or moving into a new home are now re-thinking that because the cost of borrowing that money is so much higher,” Broady said.
On the Island of Montreal, sales of single-family homes dropped by 27 per cent in the third quarter of this year, according to the Quebec Professional Association of Real Estate Brokers.
And the median price decreased by three per cent.
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It’s not just higher interest rates that are having an impact on home ownership — the increase in the cost of borrowing is having a ripple effect on credit card debt, car loans and lines of credit.
Guylaine Houle, V.P. of Pierre Roy Debt Solutions, tells Global News calls have increased by 15 to 20 per cent in recent weeks from consumers trying to get out of debt due to the higher rates.
“It’s been so long since we’ve had so many increases in so short a time frame,” she said.
Some economists insist the Bank of Canada made the right decision to increase its rates to keep inflationary pressures at a minimum.
“Increased inflation, in the long run, will hurt much more than this temporary pain of increased rates,” Emmanuelle Faubert of the Montreal Economic Institute, told Global News.
But that temporary pain of higher rates is quickly becoming a long-term nightmare for potential first-time home buyers like Gamache-Bélisle.
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