Will The Bank Of Canada's Interest Rate Increase Affect Home Buyers?

Will The Bank Of Canada's Interest Rate Increase Affect Home Buyers?

There Is a 30-60 Day Window for Buyers to Get a New Home at A Discounted Price


Bank of Canada Increases Interest Rate

On March 2nd, 2022 the Bank of Canada increased its target for the overnight rate to 1/2%, with the Bank Rate at 3/4% and the deposit rate at 1/2%. The last time the Bank of Canada increased the policy interest rate was in 2018. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet roughly constant until such time as it becomes appropriate to allow the size of its balance sheet to decline.
The unprovoked invasion of Ukraine by Russia is a major new source of uncertainty. Prices for oil and other commodities have risen sharply. This will add to inflation around the world, and negative impacts on confidence and new supply disruptions could weigh on global growth. Financial market volatility has increased. The situation remains fluid and we are following events closely. To read more, click here.

What Sellers are Experiencing

Homes for sale that have been listed on to TRREB’s MLS® System in recent weeks have seen a major decrease in the number of offers on presentation day. There has also been a notable decline in the number of showings that a property receives and may be due to the increase of interest rates by the Bank of Canada, buyer fatigue and the uncertainty that follows the invasion of Ukraine by Russia.

The Greater Toronto Area is no longer seeing 20+ offers on most homes at the moment. Some have received little to no offers which has forced many sellers to decrease their list price or terminate the listing all together. The real estate market in Toronto has shifted slightly, but this won't last long. Buyers that have been waiting to enter the market might have just found a 30-60 day gap where they can put an offer on a home with less competition.

What Buyers can Expect Spring 2022

There are 8600 active listings as of March 10, 2022 across the GTA and is projected to reach ten thousand active listing by the end of the month, bringing more inventory to the market. Looking forward, TRREB's outlook for 2022 is total home sales reported through TRREB’s MLS® System in the GTA will reach 110,000, representing a dip from 2021, but still a strong result in comparison to previous years; and The average selling price for all home types combined is set to climb to $1,225,000, an approximate increase of 12 per cent when compared to last year. The bank of Canada is scheduled to release another announcement about the monetary policy report on April 13th, 2022 at 10AM (ET), for more details click here.
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