Bank of Canada strikes again with another rate hike

❓Wondering why the BOC decided to raise rates once more? According to the bank’s Monetary Policy Report, the decision was driven by persistent “excess demand” in the economy. Canada’s population recently surpassed 40 million people, growing at the highest annual rate since 1957. This population growth fuels job creation, consumer spending, and increased demand for housing and the persistently high inflation.

🏡 So, what does this mean for homeowners in Toronto? Fixed-rate mortgage holders will experience no change in their monthly payments, unless their mortgage is up for renewal. However, variable rate holders will experience a slight increase in their monthly mortgage payments.

💸 For instance, let’s consider a homeowner with a $1,000,000, 30-year variable rate mortgage at 5.8%. Before the rate hike, their monthly payment would have been $5,823. After the increase, their rate is likely to jump to 6.05%, resulting in a monthly payment of $5,979. That’s an increase of over $156 per month.

📈 As for the real estate market, the additional 0.25% increase in rates may not be significant enough to push homeowners into hurriedly selling their homes at a significant discount, especially if they have been able to withstand the 4.75% cumulative increase so far. These resilient sellers are likely to wait until the market picks up again before listing their homes for sale, thus housing inventory will remain persistently low in the foreseeable future.

🌇 We firmly believe that the robust growth of Canada’s population will continue to drive significant housing demand. It may take years for supply to catch up with this demand. While short-term price adjustments may occur, savvy buyers should see these as buying opportunities, as Greater Toronto Area (GTA) home prices have historically delivered substantial returns over the long term.