By now, unless you don’t have any access to news media whatsoever, you’ll be aware that interest rates are on the rise.
Fixed rates have already climbed over the last couple of months and Variable rates are now climbing as well.
These increases were anticipated because our economy is doing well, too well in fact. The indicator of that is that inflation is currently hovering around 6%. You can see evidence of this every time you go to the grocery store or fill up the car.
In order to check the inflation rate and keep the economy in balance, the Bank of Canada tries to slow down the economy by increasing the cost of borrowing. When they do that, it doesn’t just affect mortgage rates, it increases the cost for companies to borrow to buy raw materials for manufacturing, to borrow to grow the company and the cost to build products as well.
That, in a nutshell, is how the Bank slows the economy.
Does a rising rate environment mean its time to stop looking to purchase a home?
Not necessarily!
While rates go up, other things happen as well:
-The ‘bad news’ reduces other people’s interest in buying. Multiple offer situations will happen less often.
-Active Buyers take a harder look at how much they’re going to spend.
-Prices stabilise instead of heading up to the next tier.
The buyer who has spent time talking to their mortgage broker will have a strategy to reduce their costs as much as possible while taking advantage of the opportunities that are coming up.
Be that calm, strategic buyer and you will flourish in this crazy environment. I am always here to help you be that buyer.
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