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September 16, 2017 - 12:00 PM
OPINION
After no interest rate hike for seven years prior to July 2017, the Bank of Canada increased its benchmark interest rate for the second time in just two months this past week. The latest increase saw the rate rise a quarter of a point to one per cent.
I think it’s fair to say that the assumption by the average Canadian is that this will make everything slow down in the real estate sector - indeed I’ve had a few people ask me this very question in the past few days. And it’s a fairly logical conclusion. After all, folks will be paying more to borrow money. However, in my experience of 17 years in this industry, the latest increase will likely encourage even more real estate activity and a bump in prices - at least in the short term.
The reason is FOMO or fear of missing out. Buyers who have been planning to get into the market see this rate increase as a threat to their plans. They fear that they’re going to miss out on a great opportunity. So in the short term, we’ll likely see an increase in interest and purchasing. In turn, this will push up prices.
One thing that will be a big challenge for many buyers is the new mortgage qualification rate, which is now set at around 5 per cent. That is huge and will be an insurmountable hurdle for some would be buyers.
In the long term, the rising rates - and they will continue to rise - will have a slowing effect, but in the short term, I sincerely doubt that will be the case.
If you have any questions about Kelowna real estate, please contact me directly. I would be delighted to assist you and answer any questions that you may have. I can be reached at 250-764-4344 or Mark@KelownaProperties.com.
— Mark Walker is a real estate agent and the broker/owner of Kelowna’s Walker Real Estate. His company runs the website KelownaProperties.com - Kelowna’s most comprehensive real estate search tool.
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