THUNDER BAY – Rising interest rates are having an impact on the local housing market, levelling off prices and the number of offers for home sales, according to the Thunder Bay Real Estate Board.
The trends come as the Bank of Canada increases its key interest rate. The central bank has ratcheted up the rate from 0.25 per cent to 1.5 per cent so far this year in an effort to tame inflation, which reached a 31-year high of 6.8 per cent in April.
The rate hike could see monthly payments jump by as much as 45 per cent in 2025/26 for variable rate mortgages taken out during the lowest-interest period in 2020/21, the Bank of Canada projected in a financial system review released last week.
The impact for fixed-rate mortgages was estimated at 30 per cent. The projection assumed mortgages would renew at between 4.4 and 4.5 per cent in 2025/26.
Local realtors started seeing impacts to the local housing market in March, when the central bank hiked rates, said Karen Hill, president of the Thunder Bay Real Estate Board.
The fact that the market was so strong before then means the cool-down is so far simply bringing prices and demand closer where they were before COVID-19, she said.
“We are actually noticing a little bit of a difference,” she said. “We’re not seeing as many competing offers, because people are very conscious about what it’s going to look like at the new interest rates.”
“The good news is the market has been strong for so long recently, that we’re going to get more towards how it was pre-pandemic.”
The average sale price of a single-detached home in the city of Thunder Bay now stands at around $340,000, up from around $320,000 at the same time last year, with price increases seen during the pandemic beginning to slow.
“It’s still classified as a seller’s market – it [only] takes the average house 11 days to sell,” said Hill. “We anticipate that just to level off a little bit.”
The rise in rates – and the possibility they could go higher still – is the biggest concern local realtors are encountering in the market currently, Hill said.
“We do anticipate a few more mortgage rate hikes by the end of the year,” she said.
