BoC hikes to continue moderating housing market's frenzy

The central bank made a third successive rate increase at Wednesday's announcement.

The Bank of Canada’s second 50-basis-point hike this year, along with subsequent increases, will continue to spur a cooling effect on residential property values across the country, according to Ratehub.ca.

James Laird, co-CEO of Ratehub.ca and president of CanWise, predicted another 50-bp hike at the central bank’s next policy announcement on July 13, “based on the Bank’s strong language.”

In a statement earlier this week, the BoC said that inflation remains “well above” target levels, and could even rise further in the near future.

“The risk of elevated inflation becoming entrenched has risen,” the central bank said. “The Bank will use its monetary policy tools to return inflation to target and keep inflation expectations well anchored.”

With the latest rate hike, “the real estate market will remain volatile for buyers and sellers until the Bank stabilizes the rate at some point in the future,” Laird said.

Particularly at risk are Canada’s variable-rate mortgage and HELOC holders.

“Anyone with a variable-rate mortgage or a home equity line of credit should understand the effect of this 50-basis point increase on their current mortgage payment, and they should budget for a further 1%-2% rise in rates by the end of 2022,” Laird said.

“Those who currently have a fixed-rate mortgage will not be affected until their mortgage comes up for renewal,” he added. “Canadians with a renewal coming up this year should shop around and lock in a rate as soon as they are within 120 days of their renewal date.”

MBN

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