A Vancouver-based realtor says the Bank of Canada’s interest rate hike is a huge blow to first-time buyers in one of the country’s most expensive real estate markets.
The 2.5 percent rate hike was the biggest by the central bank in nearly 25 years.
Kate McPhail says she has had many clients on the verge of buying their first property, but this development is likely to make that unattainable.
“There are just these sensitive segments of people who will try to find some type of home. Once their purchasing power goes down, it’s not enough for them anymore,” MacPhail, a member of Stilhavn Real Estate Services, told CTV News.
Even with the expected drop in property values, MacPhail says that won’t be enough to offset the rate hike.
“If interest rates go up two percent all of a sudden, your monthly payments just skyrocketed by about $1,000 a month.”
“Even if that creates a one-day five per cent drop in prices in the Vancouver real estate market, it’s not enough to make up the difference,” MacPhail said.
Last year at this time, a $500,000 mortgage at a 2.3% fixed rate would cost $2,190 a month.
On Wednesday, the same mortgage at 5.2 percent would cost $2,965.
A difference of $765 per month and more than $9,300 per year.
The changes are also expected to lead to a severe reduction in demand, which will lower prices across the country.
According to BC Real Estate Statistics, sales in Greater Vancouver have already dropped nearly 36 percent in the past year
MacPhail says this will now put serious pressure on those looking to sell.
“People who have properties they need to sell, especially if they’ve already bought, that now becomes extremely urgent if we’re going to see a downturn in the market.”
Add Comment