Vancouver Realtors, Andrew Hasman and Jeff Benna discuss the recent Bank of Canada rate increases and how it affects mortgage rates for Metro Vancouverites.
And remember, always speak to your accountant and lawyer before making any decisions about your paticular mortgage rate situation.
The benchmark rate was increased again by the Bank of Canada, this time by 50 basis points and we've seen a 400 base point rate increase since March 2022. That's 4.25%.
To cool the economy, produce aggrigate demand, and bring inflation back down to a 2% target level.
A typical 5 year fixed rate right now is 5.4 - 5.5% amortized over 25 years, conventional morgage of 25% down or more. Compare that to the early part of 2022, buyers were getting 2 - 2.5%.
Your payment at the 2% rate was about $4,300/month and now that's just over $6,000. That's a whopping 40% increase.
How is the mortgage rate increases affecting refinancing?
There are a large number of mortgage holders who, if they had to requalify for the same mortgage that they are carryig, they would not even qualify.
How are the rates affecting purchasing power for Vancouver homebuyers?
Short answer: The buying power of homebuyers has diminished by 30% The good news: Just because the rates have doubled does not mean homebuyer's purchasing power has been cut in half.
Have Vancouver home prices dropped?
Short answer: Yes.
There is great opportunity for buyer as prices drop and dealing with a dozen competing offers is no longer the norm.
When the media release the Vancouver real estate market news, typically they are speaking about large areas like Metro Vancouver or British Columbia. We try to focus on what's happening in Greater Vancouver area.
Prices in the Valley, Chilliwack, Abbotsford, prices have dropped by 20%.
House prices have dropped in Seachelt BC by 17%.
The price of house have changed less drastically on the westside of Vancouver or the Vancouver eastside.
The key for Vancouver homeowners to keep in mind is to know the market in your area, or the area in which you're looking to purchase a home.
Things to consider when purchasing in this Vancouver real estate market
When the market is down, it's a great opportunity to buy up to your next home because your differential is narrow. But keep in mind that in this market, it's increasingly important to sell your current home first. That prevents you from dealing with a contingent purchase. Typically you will also be the only offer going in and you have time to do due dilligence.
It's possible that the home will go down again in 2023, but if you need a place to live and are planning on being there for five years or more, then it doesn't really matter. While we don't have a crystal ball, home prices in Vancouver tend to increase over the longterm. Real estate is not a short term thing.
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