'While the lending rate has soared higher in recent months, we're only just starting to see the full impact on buying power.' RobMcLister LowestRates_ca realestate realestatenews housingmarket
As interest rates have spiralled ever higher since March — and are certain to be hiked once again on September 7 — would-be homebuyers’ purchasing power is steadily decreasing.
“This loss of leverage could easily take down CREA’s average home price more than 20% from the peak, readily eclipsing the 18.6% decline we saw in 2017-19,” he added.While the Bank of Canada’s trend-setting Overnight Lending Rate has been rising by leap and bounds in recent months, only now will the true financial pain be felt, as mortgage rates have surpassed the threshold for the mortgage stress test rate of 5.25%. tells STOREYS that this considerably changes the qualification game.
In terms of how the math shakes out, he uses the example of a borrower with a 4.3% rate and household income of $200,000. At the stress test rate of 5.25%, that borrower would qualify for $1.2M in mortgage financing, giving them an overall buying budget of $1.4M, assuming a $280,000 down payment. “There’s two sides to this story,” she says. Number one, from an inflationary or inflammatory point of view, this is horrible, people can afford so much less, this is really getting out of hand. But from the other side of the perspective, you have to look at the pie, and how big the pie really is.
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