High mortgage rates to overwhelm Canadian housing

  • by Amy
  • April 14, 2022

Canada and The real estate Industry have always walked hand in hand and soared high profits when it came to output. An all-time high housing market burns red with ultimately no sign of cooling down. From 2021 to February 2022 the real estate market in Canada bagged a solid profit because of the purchase of around roughly 552,000 homes.

Despite such an increase and heavy profit rate, the real estate industry of Canada is worried about the future market rate of housing in Canada. It has become an ironic situation, with the government promising to double the housing production and cutting the costs to make housing affordable through the release of the fiscal budget meanwhile the market and mortgage rates are hitting an all-time high and are expected to escalate more during near summers. Such a condition really tells that there will not only be a shortage of housing possibilities but also warns about the phase where housing will be available for none. 

Price hike

The end of 2021 concluded around a 19 percent rise in the prices above the borrowing capacity of a median- Canadian household. Such a rate is expected to rise to a 30 percent or more in the near future making housing in Canada a dream far-fetched. The reason for such a hike in pricing is mere because the supply is always low but the demand keeps increasing in the country. Low bank interest rates are just another crackle in the fire that will keep increasing the demand and the mortgage rates along with it. 

Rising Mortgage Rates 

The Government of Canada 5 Year Bond closed at the most elevated level in a decade nowadays. Five Year yields are critical to a genuine domain, affecting one of the key contract rates. As a result, Canadians ought to anticipate paying the most elevated contract intrigued in a decade — and these rates are fair getting begun.

Bond yields impact the mortgage as well as the interest debt in the real estate industry. The hot red pricing of the 5-year bond yield has become the reason for worry in the estate market because such a bond yield directs the 5 years fixed mortgage. It has been a record, that the Canadian 5-year bond yield has not taken this big a leap since April 2011. Due to such conditions, the Canadian 5-year mortgage rates are also at an all-time high resulting in a 17 percent drop in the buyer estimate. The five-year fixed mortgage was relatively the preferred plan for buyers until a year before but now the buyers will seek new and variable buying options with different ranges of the mortgage. This leaves a gap in the market contributing to higher levels of inflation. 

Recently the bank hiked 0.5 percent of the interest rates which will invariably result in nothing since the demand soars up but the supply to suffice higher demand is not nearly abundant. A lot of buyers are now indifferent to the price hike since the interest rates are lower even than the pre-pandemic rates. The real estate market will be in a slump as the properties are decreasing and the number of buyers running to buy the estate is high. With this there is the expectation of a solid hike in interest rate which is instigating the buyers to buy in today, colling down an all-time hot-selling real estate market. This would not only result in higher prices and lower demands in the future but also a scarcity of property until the government’s housing plan comes to the rescue in real-time. But is the Government’s housing plan a tangible asset, well the economists say otherwise.

An entirely new perspective 

While the distress of the real estate market is evident Canada's president Christopher Alexander feels a cooling down of the market won't happen. In an interview when asked about the rising prices and mortgage rates the Canadian president was heard saying  “It will take some froth out, which I think we would all enjoy.  But I think the market will adjust demand is still incredibly strong and Canadians really believe in the value of homeownership. So I think that will still continue to see people wanting to buy, just might take them a little bit longer than they had hoped.”


The fate of housing in Canada is dismal from some perspectives while ambitious from others, the future will only hold the decision of the winning perspective.


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