The pandemic-induced exodus to spacious homes in the suburbs has collapsed. Mortgage rates are jacking up dramatically to counter the excessive stimulus governments pumped into the economy. A recession is possible.
“Affordability was already an issue and rising interest rates have only exacerbated this. Many buyers are now waiting hoping for prices to fall to … offset the cost of borrowing.” With the Bank of Canada raising lending rates in the past couple of months, the typical five-year fixed-rate mortgage has jumped from about 1.75 per cent to five per cent and more. Many of those who overstretched to go all-in could soon be feeling burned.
“2023 could get challenging for highly leveraged households if rates stay high and if we indeed see a recession and job losses,” Pasalis says. “That’s when Canada could really feel the downside of basing much of its economic growth on driving up household debt.”Article contentSome politicians and real-estate players try to minimize the housing emergency in Canada by pointing to how residents in many rich countries are struggling with housing costs. But don’t be distracted.
Governments did nothing to stop the speculation. And we’ll never know if their inaction has to do with a large number of federalThis advertisement has not loaded yet, but your article continues below.Higher mortgage rates are going to reduce demand and likely prices.