Yellowknife real estate brokers are urging homeowners and buyers not to panic following the Bank of Canada’s interest hike.
The Bank of Canada raised its interest rate from 1.5 to 2.5 per cent on July 13 — the largest single increase since 1998 — in an effort to curb runaway inflation.
“I don’t think it’s going to crash our market by any stretch of the imagination,” says Kim Knutson of RE/MAX.
“Our interest rates have been unnaturally low for so long that it was bound to happen that we were going to have rate increases. I mean, it wasn’t that many years ago, five per cent was was very common, five to seven.”
She says autumn is also generally a time when the housing market slows down anyways.
She acknowledges the increased interest rates will make it harder for some prospective homeowners to get approved for a mortgage, “which I don’t think is a bad thing, either. And I definitely don’t encourage people to max out their (borrowing).”
Even if the interest rate increase won’t be a catastrophe, the housing market in Yellowknife is already out of reach for many individuals and families. The cost of housing in Yellowknife reached an all-time high in 2020, in part due to the disruption of the Covid-19 pandemic. Beyond housing prices and mortgage rates, a 2019 survey found 42 per cent of residences in the territory had at least one major problem.
Rod Stirling of Coldwell Banker, a Yellowknife real estate broker for 38 years, says interest rates will likely still remain low compared to even a few decades ago.
“People that have bought big consumer loans in (the last few) years here, they certainly were the benefactor of historically-low lending rates, but that’s just not sustainable,” he says.
“Back many, many years ago, people were still buying and selling real estate, and, you know, rates were twice what they are now.”
However, he acknowledges the rate increase will make things difficult for first-time buyers.
“It certainly is a frustration for some people that are getting into the market right now,” he says.
Stirling advises potential homeowners who are thinking about a purchase to make a decision soon before mortgage rates increase in response to the Bank of Canada’s rate hike.
“Probably sooner rather than later would be a good way for people to go, I think,” he says.