Recent report analyzes impact of inflation, interest rates, and housing inventory on real estate
Digital mortgage brokerage nesto has published its quarterly report, "Making Sense of the Housing Market in a Fluctuating Economy," authored by its consulting economist, Francis Gosselin.
The whitepaper delves into the effects of inflation, interest rates, and housing supply on the current year's market.
According to the report, the Bank of Canada will probably pause rate increases through spring; however, homebuyers are advised to stay vigilant. They should avoid waiting for prices to drop any further and should act now before the competition grows or rates increase again.
In addition, fixed-rate holders coming up for renewal in 2023-2024 will feel an impact due to higher interest rates than those locked in on their first term, unlike in 2022 when only variable holders felt the crunch.
For instance, if a homeowner secured their fixed-rate, 5-year term on a $400,000 mortgage in 2018 at 3.69%, their monthly payment was $2,037.
However, that same homeowner renewing in 2023– even with nesto’s current low rate of 4.69% – would be paying $2,256, or $219 more per month, representing a 9.7% increase.
Gosselin believes that although market conditions still appear suboptimal to many, home prices have already bottomed out.
New buyers and variable-rate holders can take advantage of the upcoming easing to secure competitive rates on mortgages for homes that will increase in value over the foreseeable future.
However, current owners with fixed-rate mortgages may feel the impact of the new policy rate when renewing their mortgages.