What the Bank Of Canada’s interest rate hikes mean for Homeowners: Since 1998 the Bank of Canada has been raising interest rates at the fastest rate. In July, the organization increased the benchmark rate to 2.5 % for the first time. This problem has been faced since 2009. The central bank is trying to bust inflation. Inflation has eased this summer. The prices remain elevated for the falling crude oil etc.
It can include food or household goods and services etc. In the Canadian real estate market higher interest rates are weighing down. Sales activity has slowed down. Prices are not reaching their as they were before. Higher rates are impacting homeowners.
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Bank of Canada’s interest rate hikes meant for homeowners: Almost 25% of homeowners say they will need to sell their home if rates continue to rise according to the survey. 1/5 of the homeowners already find it challenging to afford their homes. The borrowers are going to be affected by higher interest rates.
The rising rate has reduces the purchasing power and increases the financial burden of current homeowners who have a mortgage. A 1% hike in rates is going to add hundreds of dollars to mortgage payment each month.
How might Canadians respond: So firstly, homeowners may rush to sell their residential properties because they are not able to afford to carry the debt. This especially happens when they were purchased at or near the top of the pandemic-era housing boom. Secondly, homeowners may be forced to refinance their mortgages.
Thirdly and lastly, it could also lead to broader consequences for household budgets. It includes spending less on groceries, entertainment etc.
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