June 1st | The Bank of Canada is hiking rates by 50 basis points

With Bank of Canada (BoC) rate forecasts projecting a 50 basis point increase to 1.5% on June 1st, prospective and current homeowners are worrying about how real estate markets might be impacted.  Ostensibly, prospective home buyers will face greater difficulties qualifying for funding, due to increased financing costs magnified by strenuous stress tests at higher rates.  That said, with post-pandemic rate hikes having had notable negative impacts on housing prices thus far, some opportunities might arise for buyers to take advantage of lower prices at higher rates.  In contrast, existing homeowners might see their equity continue to depreciate as housing prices forfeit their recent gains, although prices remain considerably higher than pre-pandemic prices in 2019.

Historically speaking, an interest rate of 1.5% is relatively low in the long-term, although 1.25% is the mode of the last decade and 50-points is a rather volatile hike.  Statistically speaking, a sustained rate of 3-5% seems to be the upper bound before exaggerated price depreciation begins to set in, assuming stable overall market conditions.

Alternatively, rate hikes may have more profound effects on real estate markets such as shifting the distribution of trading volume towards lower priced real estate and rentals, or less-volatile investments such as commercial, industrial, and vacant lots.  Looking forward, market watchers should look out for BoC rate announcements on the following dates:

  • Wednesday, July 13
  • Wednesday, September 7
  • Wednesday, October 26
  • Wednesday, December 7


Media Relations, The Lind Realty Team.

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