Mortgage holders are holding their breath ahead of the Bank of Canada’s interest rate update expected on Wednesday.
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Although some experts believe that the institution will keep its interest rate at 5%, the situation in the real estate sector remains precarious.
According to real estate agent Mélanie Bergeron, buyers who are struggling with high mortgage interest rates are more cautious and have even postponed their purchase plans until later.
“There are fewer visitors, buyers are afraid to even start a project and property prices remain high,” explains the agent in an interview with Mario Dumont.
Based on his on-site observations, the cheapest homes, typically reserved for first-time buyers, are the ones that attract the most interest.
“People who were looking to buy at $800,000 before the rate hike are now aiming for $600,000,” Ms. Bergeron explains. The group of buyers for “more affordable” houses is therefore larger.
Currently the most unpopular properties: those that need renovation.
“The people are no longer in there. You have to have a pretty strong back, but it’s doable, you have to do it manually. If we pay entrepreneurs… again, a lot of people don’t have the budget for that anymore,” she notes.
Turnkey houses remain in demand, even if they are more expensive.
Difficult years ahead?
In their opinion, the problems with the next extension will be particularly felt by owners who have a fixed-rate mortgage.
“A fixed-rate mortgage at 1.6-2% was really a great gift. […] Where will we be in two years when there may be many more people in catastrophic situations? I don’t want to be a prophet of doom, but if we look rationally at what happens if you’re at 1.6% and then renew at 6% in two years… There’s a big difference! We’re talking thousands of dollars…”
In Canada, almost 35% of mortgage loans have variable interest rates, while the rest have fixed interest rates.
The situation is far from facilitating access to housing when even developers are putting their projects on hold due to the precarious situation. “The buyers aren’t there,” Ms. Bergeron notes.
Nevertheless, the broker reassures: The general feeling is that the biggest increases have already taken place.
“There are far fewer buyers. You will be able to sell it, your property, but it will require a lot more patience than before.”
She also believes that in the future, owners of slightly more upscale homes may consider lowering their price in order to sell them. Price reductions may therefore be possible for certain property categories.
“It is possible that we will see this in the future,” she concludes.