This text is part of the special Real Estate section
The recent increase in the key rate by the Bank of Canada is causing a frenzy of buyers on the real estate market in Quebec, say experts. Many aspiring homeowners want to take advantage of mortgage rates that are still low with their financial institution. And this, before the central bank raises its key rate again.
“Every time you raise rates or threaten to do so, there’s a rush of buyers into the inventory that’s available. And since there are currently few, it continues to fuel a very active market,” observes Georges Bardagi, real estate broker and president of RE/MAX du Cartier.
On March 2, the Bank of Canada raised its key rate by a quarter of a percentage point, bringing it to 0.5%, in order to fight galloping inflation. This is a first since it lowered it at the start of the pandemic to its floor level. The central bank has also warned that this increase will not be the only one to occur during the year.
A still dynamic market
The pandemic has led to high demand for real estate, especially outside urban centers for cottages, Bardagi notes. “Is it going to start to subside with the rise in rates? I do not know. Because traveling will also be more and more expensive with the explosion in the price of gasoline, ”he says.
In the metropolis, the market remains dynamic, with a fairly low number of properties available, observes the broker. “But it’s mainly the suburban market that has increased a lot,” he says.
Mr. Bardagi believes that future interest rate increases will not dampen the housing boom, but rather lead to a gradual stabilization of prices. “If I come to reduce the purchasing power of consumers by increasing the mortgage rate, inevitably, prices cannot increase as quickly and as high as they did last year,” he predicts.
Every time you raise rates or threaten to do so, there’s a rush of buyers into the inventory that’s available. And since there are currently few, it continues to fuel a very active market.
Further rate increases could balance the market later in 2022, believes Robert Hogue, deputy chief economist at RBC Canada. “We still expect a substantial increase in all and for all of 1.5 percentage points. This is where, in our opinion, it will start to weigh on demand, ”he says.
A fixed or variable rate?
The Bank of Canada’s recent announcements are also causing fear among those who already own a property, notes Philippe Béland, mortgage broker and member of the Mortgage Consortium. “We have more discussions to know if it is better to fix the interest rate or not”, he illustrates.
According to him, there are “a lot of factors” to consider. “But, unfortunately, people sometimes tend to react with fear,” he observes. The term date of the mortgage, the difference between the current fixed and variable rates, the plan to buy another property… these are some of the factors that can tip the balance one way or the other. other. “There are aspects outside of interest rate forecasts that may make it better to keep the variable rate,” says the broker.
More and more difficulties for first-time buyers
Those who will take the brunt of rising interest rates remain first-time buyers, Hogue believes. “For them, the pressure is increasing. Due to the rise in prices that we have experienced particularly during the pandemic, and now, in an environment where interest rates are going to be increased, ”he says.
Mr. Béland agrees. The mortgage broker observes that more and more first-time buyers are receiving financial assistance from their parents for the down payment or to secure their loan. “A first-time buyer, even with the minimum down payment, the project is slipping out of his hands,” he says.
Either way, experts recommend erring on the side of caution. So buyers should pre-qualify for a mortgage before taking action and, perhaps, revise their price down, Bardagi says.
According to Mr. Hogue, buyers will also have to be open to compromise. “Whether it’s in the housing style, the neighborhood or another city, where people may be able to find something that would fit their budget more. »