The Latest Mortgage Rate Hike May Only Have a Negligible Effect.

Last week, the Bank of Canada hiked the interest rate another quarter point to 1.25%—a seemingly superficial number depending on which part of the country you’re in.

The housing demand in Canada’s three largest cities is so great that removing a handful of buyers—as the new mortgage rules and interest rate increase will do—will have a negligible impact. However, in cities like Edmonton and Calgary, they’re recovering markets and this change will be harder to absorb because their housing supply is higher than the demand. Markets in St. John’s and Regina will be affected the most.    

The new mortgage lending rules are estimated to reduce purchasing power by 15-17%.

However, the quarter-point increase based on a fixed-term mortgage works out to about $12.50 per month on every $100,000 of mortgage It’s not that much, especially in Toronto where the inventory levels are so low. And it likely won't affect the condo market at all. In the past 6 months, along with the previous increases, it amounts to a total of $25 per month for each $100,000 of mortgage. 

One market that emerged from 2017 relatively unscathed is Montreal, as demand is still strong and there wasn't any government intervention. Prices in Montreal surged & oeven utpaced Toronto & Vancouver's last year, but they're still more affordable because they tried to curb demand instead of getting more supply.


With the combination of the new labour law, tax laws and new mortgage rules, both Buyers and Sellers, are going to be cautious and it will take two or three months for us to see the actual impact on the market.