STEPHANIE IP (VANCOUVER SUN - The Bank of Canada’s latest benchmark interest rate boost should come as no surprise to those dabbling with B.C.’s real estate market though buyers and those looking to renew their mortgages should brace themselves.
On Wednesday, the BOC raised its rate a half point to 1.5 per cent, following what had already been a half point hike in April and what’s expected to be another hike in the coming months. The rate hike is in an attempt to balance inflation — which rose to 6.8 per cent in April — amid international political turmoil and the ongoing recovery from COVID-19 and resulting unemployment. The impact of the BOC’s continued hikes can also been seen in the continued calm that seems to have infiltrated parts of B.C.’s real estate market. Brendon Ogmundson, chief economist with the B.C. Real Estate Association, notes Wednesday’s rate hike is just the BOC following through on what it had already signalled previously, albeit at a faster pace than has historically been seen. As a result, much of the rate hike had already been built into the real estate market’s response. “None of the last two 50-basis-point hikes have been unexpected, (they’re) already priced into mortgage rates,” said Ogmundson, noting five-year fixed mortgage rates now sit at 4.39 per cent, the highest since 2009. “So the impact is already here, even though we’re only seeing the rates increase now and we probably have another 100 basis points plus to go.” That impact can also be seen in April and May sales data in most B.C. markets, where sales have slowed and supply slowly begins to creep up again. “Sales … mostly in the Lower Mainland, have started declining pretty sharply,” said Ogmundson, citing the Fraser Valley, Surrey, Langley, Abbotsford, Chilliwack and the Greater Vancouver areas. “We’re seeing a level of sales activity in May that is below average for that month, so we’re starting to see some weakness in sales already, active listings of the inventory of homes for sale starting to come up it’s coming from a really low level. “So we’re still in a market with probably more demand than supply but it’s definitely a market that’s rapidly shifting.” As for what to expect moving forward, Ogmundson points to the 2018-2019 sales year, when the market was in similar shape, with the newly implemented stress test for buyers, the BOC hiking rates, and low market supply that was slowly beginning to build up. “I think that’s kind of where we are now. We’re just a low supply environment that it’s probably going to take about a year in most markets to get back to kind of normal levels of supply,” he said. While those who are locked into fixed rates need not worry any time in the immediate future, it’s those who are up for renewal or who are seeking to buy that might want to brace themselves. But as always, the advice remains the same. “Find something you’re comfortable with, that you can afford over the next five years,” said Ogmundson in reference to mortgage rates, noting that will help buyers to “smooth out these types of cycles” and so they don’t have to worry about the ups and downs of the market. “We have these periods of rapidly accelerating prices, unfortunately, and then we have a lot of periods of real walls and I think that’s probably what we’re heading into the next couple of years. This is an interest rate environment we haven’t seen in over a decade so the next two years are probably gonna look a lot different than the previous two years.” |
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