The TD Real Estate survey found that 26% of Canadians don’t have a good understanding of the impact of rising rates. 38% are confused about what the hikes mean for them.
Nearly 40% don’t know the difference between variable and fixed interest rates. And one of the most shocking stats that came from the data was that 31% of respondents believe that interest rates don’t impact them or their mortgage.
This survey was conducted between May 20 and 25. The national survey included responses from 2,000 Canadians aged 18 and older.
Interest Rate Hike & What It means FYI:
Just to make it clear, in case it wasn’t already – rising interest rates affect all Canadians. If you are Canadian – this means you. Rising interest rates will especially affect those who are looking to become homebuyers in the near future. And will affect those up for renewal.
Rising interest rates decrease your purchasing power. As interest rates rise and inflation rises and the cost of everything rises your monthly pay checks do not go as far as they used to.
Of those who are hoping to buy a home in the next year, 76% say they are worried about the impact that rising rates will have on what they can afford. While 27% admitted to not knowing or understanding many of the costs associated with buying a home. If you are one of those people who do not know what costs go into buying a house, please educate yourself on “homeowner ship” and the monthly costs associated to it.
Most economists and bankers say the chances of a 75-basis-point increase in interest rates next months are 80%. They also believe that the Bank of Canada (BoC) will follow the footsteps of the U.S. Federal Reserve when it raised the policy rate by 0.75% last week.
What Comes Next:
According to former BoC governor David Dodge, the policy rate must go up quickly to neutral level. He said, “I think it’s been quite clear that central banks need to get up to neutral in North America quickly to make up for lost time in 2021.”
Dodge added, “Whether they’re going by 50 basis points, 75 basis points, or even making a full-point move really isn’t so much the issue.” Once interest rates in North America return to neutral, the Feds can then reassess the next direction of rates. However, it depends on global economic conditions.
Does That Mean More Hikes Are Coming:
Probably. More and more economists are thinking the economy needs higher interest rates, and it can certainly handle higher interest rates.
Canadian citizens are feeling the pinch already. So, before the year is over, get ready for another hike.
If you are looking to get into a house – locking in a mortgage before the next increase might be a great option for you.
As always, if you need help buying or selling your home do not hesitate to contact Gregg Bamford or Ryan Bamford.