Three rate increases this year have been effective in slowing the economy, as seen by the announcement of GDP data for June and the second quarter of 2023. Many Canadians will breathe easier now that the Bank of Canada has indicated it would temporarily halt its current 5% overnight lending rate. Weaker growth in the Canadian economy is required to ease pricing pressures, and this era has begun. In the second quarter of 2023, economic growth slowed dramatically, with production falling by 0.2% on an annualised basis. This was due to “wildfires’ effect on many regions of the country and a marked weakening in consumption growth and a decline in housing activity,” the announcement said.
Implications for Canada's Real Estate Market this Autumn
Once Canadians return to their usual routines in the autumn, real estate activity usually picks back up after a slow summer. After months of volatility, it’s hard to anticipate how the autumn market will unfold. September could be slow. Therefore, sellers are waiting until September to decide whether or not to offer their homes. This is because they are worried about rising interest rates and a lack of news coverage throughout the summer.
However, there will always be interested consumers, and a shortage of products might eventually lead to a price drop. The new listings might reach a high point in October because of the historically low supply of properties.
Big Banks are increasingly reliant on Extra-Long Amortisations
While the rate freeze is welcome news, Canadians already feel the pinch of increased rates. They have begun looking for extra-long amortisations to reduce their monthly payments. In their third-quarter results reports besides the Bank of Canada, RBC, TD Bank, CIBC, and BMO, four of Canada’s largest banks, all said that 40 percent of their existing mortgage clients had loans with terms longer than the customary 25 years.
A longer amortisation time may make your mortgage payments more manageable, whether you apply for a new mortgage or refinancing. The amortisation lengths offered by many of the largest banks have increased to 30 years. While some alternative lenders may go as high as 35 years.