July 2023 marked a significant shift in Canada’s financial landscape, with the Bank of Canada hiking up the interest rate to 5%. This move is impacting all Canadians, especially those who had borrowed heavily to invest in the real estate market. Here’s what these changes mean for the New Brunswick real estate trends in 2023:
The Bank of Canada’s decision to raise interest rates was an attempt to cool the housing market and bring inflation under control. Higher interest rates make it more expensive to borrow money, which can slow down the demand for homes. As a result, we can expect to see a decrease in home prices in the coming months.
As a result of these trends, several key developments are expected to take shape:
- Ontario’s Market Downturn: With financial conditions changing, Ontario, a long-time favorite among homebuyers, may experience a drop in demand. Fewer buyers could lead to a drop in house prices, although the extent of the potential decrease is hard to gauge due to the province’s ongoing housing shortage.
- New Brunswick’s Stability: Interestingly, this emerging trend aligns with the Canada Mortgage and Housing Corporation’s (CMHC) market forecast. The CMHC predicts a decrease in Ontario’s housing prices between 2023 and 2024 while anticipating fairly stable prices in Atlantic Canada.
- Moncton, St. John, and Fredericton Rising: These New Brunswick cities are garnering more attention from Canadians searching for affordable homes. The stable real estate market in these locations might just be the perfect antidote for those feeling the pressure of higher interest rates.
Mortgage Troubles
One group that is expected to feel the brunt of this change most acutely are those homeowners who over-leveraged during the ongoing housing crisis.
These homeowners took on a lot of debt to buy homes at inflated prices, and they may now be struggling to make their mortgage payments. With higher interest rates, these homeowners will have even less money to spare, and they may be forced to sell their homes.
This could lead to an increase in home sales in the coming months, as over-leveraged homeowners seek to liquidate their assets. This could also put downward pressure on home prices, as there will be more homes on the market and fewer buyers.
The increase in interest rates is also expected to have an impact on the Canadian economy as a whole. Higher interest rates make it more expensive for businesses to borrow money, which can slow down investment and economic growth. As a result, we can expect to see a slowdown in the Canadian economy in the coming months.
Overall, the Bank of Canada’s decision to raise interest rates is a significant change that will have a major impact on the Canadian housing market and the Canadian economy. Homeowners who are over-leveraged should be prepared for challenges, and businesses should be prepared for a slowdown in investment and economic growth.
Here are some additional things to keep in mind:
- The impact of the Bank of Canada’s interest rate hike will vary depending on the individual homeowner’s circumstances. For example, homeowners with fixed-rate mortgages will not see their monthly payments increase immediately, but they will still be affected by the higher interest rates if they need to refinance their mortgage in the future.
- The impact of the interest rate hike will also vary depending on the specific housing market. For example, homeowners in Toronto and Vancouver, where home prices are already high, are likely to feel the impact of the higher interest rates more than homeowners in other parts of the country.
- The Bank of Canada has said that it is prepared to continue raising interest rates if necessary to bring inflation under control. This means that the impact of the interest rate hike could be felt for some time to come.
What can homeowners do to prepare for the impact of higher interest rates?
- Review their mortgage payments to see how much they will increase with higher interest rates.
- Consider refinancing their mortgage to take advantage of a lower interest rate.
- Make a budget to see how they can adjust their spending to accommodate higher interest rates.
- Build up their emergency fund to have a cushion in case they experience financial difficulties.
What can businesses do to prepare for the impact of higher interest rates?
- Review their borrowing costs to see how much they will increase with higher interest rates.
- Consider refinancing their debt to take advantage of a lower interest rate.
- Create a contingency plan in case they experience financial difficulties.
- Make sure they have a strong cash flow to weather the storm.
The Bank of Canada’s interest rate hike is a significant change that will have a major impact on the Canadian housing market and the Canadian economy. Homeowners and businesses should be prepared for challenges and take steps to mitigate the impact of higher interest rates.
The Bank of Canada’s interest rate hike is an increase in the benchmark interest rate, which is the rate at which banks borrow money from the central bank. The Bank of Canada raised the benchmark interest rate by 25 basis points on July 13, 2022, to 2.5%. This was the fourth consecutive interest rate hike, and it brings the benchmark interest rate to its highest level since 2008.
The Bank of Canada raised interest rates in an effort to cool the housing market and bring inflation under control. Inflation in Canada has been running at a high level, and the Bank of Canada is concerned that it could become entrenched if it is not brought under control. Higher interest rates make it more expensive to borrow money, which can slow down the demand for goods and services and help to bring inflation down.
The cost to purchase a home is significantly less money than Ontario. By selling a home in Ontario or British Columbia for example, you could reduce your mortgage and monthly payments.
