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Things To Consider in the Face of Rising Interest Rates
The Bank of Canada (BoC) has said it will be use its monetary policy to tamp down inflation, which currently sits at a 30-year high, joining the chorus of central banks worldwide trying to grapple with the rapidly escalating cost of living. So far this year, the BoC has already moved forward with rising interest rates three times, and Governor Tiff Macklem is preparing the financial market for more quantitative tightening in upcoming policy meetings.
But while the objective is to garner a stranglehold on a surging consumer price index (CPI) and producer price index (PPI), rate hikes will lead to financial pain for borrowers, investors and homebuyers.
Indeed, the Canadian real estate market is seeing the effects of a rising-rate environment. According to the Canadian Real Estate Association (CREA), in April, national home sales tumbled 12.6 per cent month-over-month. The national average home price was about $746,000, down a tepid 0.6 per cent month-over-month.
“After 12 years of ‘higher interest rates are just around the corner,’ here they are,” said Shaun Cathcart, CREA’s Senior Economist, in a statement.
Now that Canada is waving goodbye to the era of historically low interest rates, what do homebuyers and owners need to consider in a post-pandemic economy where rates are on the rise?
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