Putting Rising Interest Rates in Perspective for Thompson-Okanagan Homebuyers

Image credit: ADOBE STOCK

The 1% increase in the Bank of Canada’s prime interest rate today, July 13, is actually a good thing, according to an Okanagan realtor.

“We are still at historically low interest rates,” Shane Styles, president of Epic Real Estate Solutions, told iNFOnews.ca. “We just came out of a time where it was kind of crazy. These are really very comfortable interest rates.

Mortgage rates were 19.25% in 1982 and 6% to 7% in the 2000s, still lower than around 3.5% in recent days (depending on mortgage type).

The 1% increase puts the bank’s prime rate at 2.5%. That’s a big jump from 0.25% at the start of the year, and according to a bank press release, it can be expected to rise further this year.

The central bank should try to rein in inflation which is expected to stay within the 8% range over the next few months, the statement said.

“The Board of Governors has decided to accelerate the path to higher interest rates,” the press release said.

This means that mortgage rates will jump around 1% in the coming days, which is not a problem for potential buyers who have been pre-approved.

There are a lot of “reflex” reactions to the news, most of which are unwarranted, Styles said.

One of the mortgage brokers he deals with regularly told him today, for example, that she gets a lot of calls from people who have fixed rate mortgages and think their rates just went up.

This is not the case since their rate is fixed until the time of renewal.

Those due to renew their mortgage at this time may face higher interest rates, but since around 2018 they had to qualify at 2% above the interest rate at that time. That means they should be able to afford that relatively small increase, Styles argued.

The 1% difference means about $100 more per month on a $300,000 mortgage, Styles said.

“I go out to restaurants a lot and people watch,” he said. “If they just ordered two entrees less and didn’t order a bottle of wine, they would cover the difference.”

Or, it will see people buying $6 lattes four days a week. That covers that $100 increase.

“I think what’s happening in the market is a really good thing because it helps people reaffirm their priorities,” Styles said. “Restaurants are crowded. I see no shortage of consumer spending. It’s very different today from what happened in 2008 and 2009. We don’t have a bank failure.

For people buying used homes, prices in many areas have actually fallen in recent months and bidding wars are rare.

READ MORE: Some housing prices fall in Okanagan, Kamloops

This means that people are better able to buy within their price range and get the house they want, rather than just grabbing whatever they can get, as was the case a long time ago. just a few months.

In the pre-sale market, where Styles primarily operates, people can lock in current mortgage rates for up to five years if they fear a rate hike in the two to three years it takes to bring new products to market.

“I don’t know exactly how it’s going to play out, but I think this immediate reaction from the Bank of Canada to, as they say, crush inflation is necessary. I don’t think that’s a bad thing. We have to get inflation under control and that’s how we’re going to do it. Then it will start to stabilize and we will find ourselves in an interest rate environment that anyone over 40 will be very comfortable with. And everyone under 40 should read history books.

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