Manitoba home sales fall in August due to higher cost of borrowing
The Bank of Canada once again sparked interest in an effort to combat high inflation.
This is a measure intended to cool spending, but will also increase monthly payments for some mortgage holders.
Bad news for Manitobans already strapped for money due to the high cost of living.
“Groceries, gas, pretty much anything,” said Brie Evans, who tries to stretch every dollar, in part by buying in bulk. “Wherever you want to go is pay, pay, pay.”
In an effort to bring down high inflation and the price of everyday items, the Bank of Canada on Wednesday raised the interest rate by 75 basis points to 3.25%.
It’s a move that will make borrowing even more expensive and could hit some homeowners particularly hard, especially those with variable-rate mortgages.
“You expect to see your rates go up. The big banks offer static payments on their variables, but at times, if rates go up enough, they hit trigger rates and your payments will go up,” said Peter Paley, a mortgage broker at Dominion Lending Centers Mainstream Mortgages.
This is the latest in a series of rapid rate hikes across Canada that are already being felt in the Winnipeg-area real estate market.
“Obviously, interest rates have an impact on our market. That’s how much,” said Peter Squire, vice president of outreach and market intelligence for the Winnipeg Regional Real Estate Board.
“You must now qualify at a higher rate. You must pass the mortgage stress test which is still two points above what you were able to negotiate.”
Squire said it took longer for the increases to have an impact on the region’s relatively stable housing market.
The council’s new figures show sales last month were down 15% from August 2021 and 9% from the five-year average in August.
“Certainly some consumers, some shoppers in particular, are not able to buy what they were looking to buy,” Squire said.
Paley has been busy answering calls about the rate hike.
He said that although borrowing for a new home is getting more expensive, rising rates may not be bad news for everyone.
“Those who were in the hot market and kind of held back are finding that now is when they can actually get the home they want,” Paley said.
Evans is prepared for more financial pressure in the coming months and is focused solely on maintaining financial stability.
“Everyone has hopes and dreams, but right now it’s scary,” Evans said. “You are afraid to take this step.”
The Bank of Canada said the continued effects of COVID-19, continued supply chain disruptions and Russia’s war in Ukraine are factors driving up inflation.
The Bank of Canada is trying to bring inflation down to 2%, so the interest rate is expected to rise further.
The next scheduled announcement on the overnight rate is set for October 26.