Will interest rate hikes really affect market momentum?


January's numbers are in and there's been a +6.9% increase in the average seasonal price over December 2021 (+28.6% YoY January 2021).

In addition to labour market conditions and expected record high population growth, the prospect of interest rate hikes by the Bank of Canada this year may be an important factor impacting housing markets in 2022. While BoC tightening cycles have historically led to fewer transactions, it is important to remember that home buyers have recently been held to a much higher qualification standard under the OSFI stress test. This could mitigate the impact of higher contract mortgage rates moving forward. Will interest rate increase's slow the market momentum? Rate increase's will affect affordability for some buyers but price increase's, in my opinion, are highly likely to continue through to 2024.

"Job creation in average to above-average income sectors is expected to remain strong, further buoying consumer confidence to make a large-ticket purchase of a home. Unfortunately, the supply of listings will remain constrained, sustaining strong competition between buyers and double-digit growth in selling prices,” said TRREB President Kevin Crigger.

Other factors that may affect market conditions are the provincial and municipal elections this year in Ontario. These are the levels of government whose policies impact real estate development the most.

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