Despite the housing market starting to cool, experts in Ontario’s Barrie and Simcoe County areas say the rising interest rate is making it even harder for those looking to buy or sell their homes.
On Oct. 26, the Bank of Canada raised its key interest rate by half a percentage point, a more minor step than economists and markets had expected but still above the standard 25-basis-point increase.
The move marks the central bank’s sixth rate hike this year. Since March, the Bank of Canada has raised its key interest rate to 3.75 per cent from 0.25 per cent, making it more expensive for Canadians and businesses to borrow money.
With the interest rate continuing to rise, homebuyers in Simcoe County are feeling the increase, with the dream of first-time homeownership becoming further out of reach for some.
“It’s a lot more difficult for especially first-time homebuyers to purchase properties because the with these rates going up, it also forces the qualifying rate to go up fairly dramatically. So it’s the affordability side that’s really being eaten away,” said Darren Robinson, a mortgage broker in Barrie with Oriana Financial.
“Right now, we’re at such a high-interest rate that it still hasn’t levelled itself out. I think we’re still going to see some drop in house prices going into next year, and I don’t think it will be until then that you’ll actually see a seller-buyer sort of level market.”
For those looking to buy homes, Robinson said a lot more people are looking at shorter-term rates of one to two years in the hopes the rates will go back down while others are trying to ride out the higher variable rates.
He said while there was a rush to find a house and lock in the lower rate six months ago, now they are seeing more people try to wait it out and see what happens.
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“I think we’re kind of near the peak, or at least I’m hoping that we’re near the peak of the interest rates and that as inflation comes under control going into the first and second quarter of next year, that we’ll start to see interest rates drop. With the combination of lower house prices, I think that will sort of heat up the market again and get us back on to a more normal cycle.”
When asked what needs to happen to help, Robinson said the government needs to step in to help first-time homebuyers.
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“So I think it’s more of a legislative sort of solution on that side because, in the near future, I don’t see people getting into the housing market that don’t have any sort of equity to transfer over from a house that they currently own.”
Shannon Murree, a real estate agent with the MovingSimcoe.com team with RE/MAX in the Barrie area, said homesellers are also being impacted.
Murree said she has one family she was helping sell their home who, by the time they found a house that worked for them and were looking to sell their own, found out the amount they qualified for had changed.
“The interest rate changed, and then they realized they were priced out of the market. So we had to sit down and talk about affordability,” she said.
“They were a large family, and they just said, you know, we’re priced out of the market. We can’t sell our house for what we need. The interest rates now have just made it (not) make sense for us to move. So they just decided not to buy and decided to take their house off the market.”
Murree said the issue is that the cost of everything continues to rise, but people’s salaries are not going up, leading to more people being priced out.
– with files from Global News’ Craig Lord
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