Since the Bank of Canada started lifting interest rates from the low of 0.25 per cent in March, home sales have plunged along with home prices
“We see the downturn intensifying and spreading as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates,” said Robert Hogue, assistant chief economist with Royal Bank of Canada.
Mr. Hogue said the country’s priciest real estate markets, which include the Toronto suburbs, were the most vulnerable to declines because of their unaffordability and their previous astounding price increases. But economists say home prices will continue downward. Bank of Montreal economists said the central bank’s guidance solidified their view that the national home price index could fall by 20 per cent from the peak earlier in the year to the bottom sometime next year.
Today’s interest-rate hike will make the mortgage stress test harder. Under federal bank rules, borrowers must prove they can make their monthly mortgage payments at an interest rate that is at least two percentage points higher than their actual rate.
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