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Home prices to keep rising, despite interest rate hike?

Home prices to keep rising, despite interest rate hike?

Wednesday’s interest rate hike by the Bank of Canada – the first increase in nearly seven years – has Royal LePage unfazed. Home prices will continue to rise.

Royal LePage Canada President and CEO Phil Soper offered the following comments: “Canadian homeowners are prepared for the marginal increase in mortgage rates. We believe that the market is better served by a healthy economy that requires a return to normal conditions.”

Soper also doesn’t foresee the prospect of another rate increase, which could come as early as September, triggering a rush by prospective homebuyers to make a purchase and lock in a fixed interest rate on their mortgage.

 

 

Such a rush never materialized in the immediate aftermath of the financial crisis, when many thought rates would climb back up just as quickly as they had come down at the onset of the Great Recession.

If Canadians didn’t panic then, Soper reckons, they won’t think much for the current cycle of rate hikes, which is widely expected to be slow and gradual.

Still, Soper’s views are based on the expectation that interest rates won’t rise beyond 1 per cent over the next year and a half (up from 0.75 per cent today and 0.5 per cent until Tuesday).

That assumption differs from what some of the big banks are forecasting, with Royal Bank and Bank of Nova Scotia, for example, indicating that a hike to 1.5 per cent by the end of 2018 is possible.

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