Higher interest rates holding back B.C. homebuyers
Posted October 12, 2023 7:34 am.
Last Updated October 12, 2023 7:40 am.
Economists are divided on whether or not the Bank of Canada will hike interest rates later this month, and it seems nervousness over higher borrowing costs is holding back some homebuyers.
Royal LePage has tweaked its year-end forecast, revising its fourth quarter predictions from an 8.5 per cent increase in the national aggregate price of a home down to 7.0 per cent, year-over-year.
It may not sound like a lot, but Royal LePage says it’s a sign elevated interest rates are having an impact — some major markets across the country have been softening over the past three months and are expected to remain sluggish through Q4.
“We don’t anticipate a material change in property prices through the remainder of the year,” explained Phil Soper, president and CEO of Royal LePage. But he adds that could change quickly, depending on how the Bank of Canada proceeds with interest rates.
“Once interest rates begin to ease, even by only a small amount, we expect buyers will return to the market in large numbers and the relentless upward march of home prices will begin again. At its root, housing supply remains out of step with the growing need for it.”
The BC Real Estate Association has also just released its September numbers, suggesting homebuyers are more hesitant.
“Home sales in B.C. have clearly been impacted by the Bank of Canada’s recent tightening of interest rates, along with the resulting surge in mortgage rates,” said BCREA Chief Economist Brendon Ogmundson. “Home sales are once again trending at below average levels as potential buyers struggle with a high cost of borrowing.”
In September, the Bank of Canada held its key overnight rate steady at 5.0 per cent after two hikes through the summer.
The next interest rate announcement from the central bank is scheduled for Oct. 25 and economists are divided on whether its key lending rate will stay the same or we will see another hike.
A lot depends on the latest inflation numbers due out next week, as if inflation rose in September, there is a higher likelihood the central bank will increase lending rates.
