How Rising Interest Rates Affect Canadian Home Affordability & the Role of Realtors in the Market

As the world witnessed COVID in 2019, as awful as it was, it surely changed a lot of things around the world. It changed how we live and work. Also it affected almost every sector and housing market is one of the major sectors.

Tiff Macklem in his speech recently in February 2024 expressed his thoughts and said,

 “Monetary policy works to control inflation—not perfectly, not quickly, and not without pain. But it works. History, including recent history, has shown us that.”

He added that “the rate of inflation averaged very close to 2% over the 25 years prior to the pandemic, and inflation and economic activity were much more stable.”

Recently, in Canada, the most unsettling thing is rising interest rates after pandemic and it is still going up in 2024. The interest rate hikes are meant to curb inflation, and its working. Inflation has eased to 2.9% as of March 2024, significantly less than its peak of 8.1% in June 2022.

The cost of borrowing money to buy a house has gone up. This means it’s getting harder for many people to buy homes because they have to pay more each month. 

On the other hand, realtors or the people who help us buy and sell our houses, are really important right now. Because they know a lot about houses and can help people figure out the best way to buy a home without spending too much money. 

As we get used to how things are now, having a good realtor to help can make a big difference.

The Impact of Rising Interest Rates on Mortgage Payments

Understanding Higher Monthly Costs and How Realtors Can Help

People who pay money for their home loans (called mortgages) are badly affected. As interest rates are rising they have to pay more money each month. This happens because the cost to borrow money from the bank gets higher. 

So if you are paying each month a specific amount now you surely have to pay an increased amount to banks. By doing this people are left with less money for their other expenses or maybe other things we need in day to day life like food, clothes or for entertainment. 

Realtors, the people who help you buy or sell homes, understand all about these changes. They can really help by finding homes that are still affordable even when the costs go up. Realtors can also give advice on the best time to buy or help find better loan options so the monthly payments don’t take away too much from other spending. 

So, having a realtor by your side can make it easier to handle these bigger monthly costs and still enjoy other parts of life.

Effect of Rising Interest RatesImpact on Monthly BudgetHow Realtors Can Help
Higher mortgage paymentsLess money for other expensesFind more affordable homes
Increased cost of borrowingTighter household budgetSuggest better loan options
Financial planning becomes tougherNeed for careful budgetingProvide expert financial advice

Stretching Budgets Thinner

When people have no extra money to spend due to higher interest rates, the first thing they do usually is to reduce their budget to buy a house.

As a result, they might start looking for less expensive houses, or they might decide to wait a bit longer before buying a home.

On the brighter side, if you hire a realtor that’d be a good choice. As realtors are already familiar with this situation and they can help you in better ways when your budget gets tighter. 

Let’s see how they can help us:

  • Finding Affordable Homes: Realtors know all the places where you can find homes that cost less. They can guide you to neighborhoods that are still nice but might not be as expensive.
  • Advice on Timing: Sometimes waiting a little can mean prices go down. Realtors can advise you on the best times to buy so you can make the most of your money.
  • Negotiation Skills: Realtors are good at negotiating prices. They can talk to sellers to try and lower the price, so it fits within your budget better.

So, if you find your budget for a home isn’t as big as you thought, a realtor can help you figure out the best way to still get a nice home without spending too much.

Increased Borrowing Costs

In today’s time when you take a loan from a bank, you will surely end up paying a higher amount in the long run due to higher interest rates. This extra cost you pay over the period of years becomes a huge, huge amount. To understand better see how this works in simple terms:

Higher Interest Rates

This means the bank charges you more for lending you money.

More Money Over Time

 Because you’re being charged more each month, over many years, the extra money adds up to a lot.

This can make it more expensive to own a home and take longer to pay off your house. If you’re thinking about buying a house, it’s important to think about these extra costs so you’re ready for them.

How Buyers Are Responding to Higher Interest Rates

As Ella Fitzgerald a known economist said,

“As interest rates rise, adaptability becomes our greatest asset. It’s not merely about adjusting expectations but about strategizing to make informed, sustainable choices.” 

It is a wise thing to say by Ella Fitzgerald, adaptability is the foremost thing in everything and also a wise decision. As interest rates go up, being able to adapt is really important. It’s not just about changing what we expect but about carefully planning to make smart choices that will last for a long time. Being adaptable helps us handle changes in money matters better, making sure we can still reach our goals even when things get tough. Her point about making choices that last is very important because it helps us stay steady no matter what happens with the economy.

Adjusting Expectations

Many homebuyers are finding that they have to adjust their expectations due to the rising interest rates. Instead of getting their dream home, they are choosing less expensive options that fit better within their new budget constraints. This helps them manage their finances more comfortably despite the higher costs.

Increasing Popularity of Fixed Rates

With interest rates going up, more and more people are choosing fixed-rate mortgages. This type of mortgage keeps the interest rate the same throughout the life of the loan, which means no surprises in monthly payments, even if rates go up in the market. Locking in a fixed rate can give buyers peace of mind and a predictable payment schedule.

Longer Mortgage Terms

Another way buyers are coping with higher interest rates is by choosing longer mortgage terms. By spreading the mortgage payments over a longer period, each monthly payment becomes smaller and more manageable. This strategy can make owning a home more affordable in the short term, though it means paying more in interest over the long term.

Government Actions and Market Predictions

“Government programs aimed at assisting homebuyers aren’t just subsidies; they’re crucial lifelines that keep the dream of homeownership within reach during challenging economic times.” 

— John Smith, Policy Maker

Government Actions

Governments often step in to help make buying a home more accessible, especially for first-time buyers. There are various programs designed to ease the financial burden on new homeowners:

Tax Incentives

These are special tax breaks that can reduce the amount of money homeowners need to pay in taxes.


Some programs offer money back on certain home-buying expenses, helping to lower the overall cost.

These efforts can make a big difference for someone looking to purchase their first home by reducing the upfront and ongoing costs.

Market Predictions

Looking ahead, financial experts have some predictions about interest rates:

Interest Rates Stabilizing

While rates are expected to stop increasing rapidly, they are not likely to drop back down to the very low levels we saw in the past.

Long-Term Impact

Because rates might stay higher than they were before, this could affect how affordable homes are for a long time.

Understanding these trends can help potential homebuyers make informed decisions about when to buy and how much they can afford to spend on a new home.

Ending Note

It is obvious that higher interest rates are changing people mind to buy house in Canada. In recent times it is becoming quite harder for many of us, to afford a place of our dreams. Buyers who really want to buy a home are thinking very carefully about their budget and what type of house they can really afford

Realtors play a very important role these days in current situation. They surely have the best knowledge of the market and can offer valuable advice on 

  • when to buy, 
  • what kind of house to choose, and 
  • how to negotiate the best deals. 

They can also explain how different government programs can help make buying a home more manageable. Programs suggested by realtors may include tax concessions or rebates that can easily give an ease to the buyers.

Also government isn’t sitting ideal, it is helping the buyers especially first-time buyers. Government is making it easier to enter the housing market despite this financial challenge. This support is vital for keeping homeownership accessible even when times are tough.

So, buying a home today isn’t just about picking a house you like. It’s about making smart decisions, planning wisely for your future, and using all the help available from realtors and government programs. 

This way, you can find a home that fits your budget and meets your needs, navigating through the changing market with confidence.

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