Brokers doubt higher interest rates here will have the same effect as in the U.S., where potential homebuyers are backing off in greater numbers.
“In Canada, it is a combination of government regulations and interest rates that have a bigger impact,” says Roslyn Goldmintz, president of Verico
RBG Mortgage Professionals. “Canada and the U.S. are two different markets; what’s happening there doesn’t necessarily dictate what will happen here.”
Another distinction between the two countries is the effect of foreign investment in major Canadian urban centres.
“You have significant foreign investment activity in the Toronto and Vancouver markets,” she says, “and that has a stabilizing effect on the market.“
According to recent numbers for the U.S. Mortgage Bankers Association, interest rates on fixed 30-year mortgages rose for the ninth straight week to average 4.68 per cent on July 5 – the highest since July 2011 and up 10 bps from the week previous.
Some industry experts had expected a rush by undecided buyers into the market to lock in rates before they rise even higher, but the MBA’s seasonally adjusted gauge of loan requests for home purchases instead fell 3.1 per cent, declining a second-straight week.
But from Goldmintz’s perspective, rising interest rates in Canada do spur business.
“That tends to happen here – when rates climb higher, you have a flurry of activity,” she told MortgageBrokerNews.ca. “That has been my experience with the clients I have.”
Some of the other numbers coming from the U.S. include a drop in refinancing applications of 4.4 per cent last week, with the share of refinancing in total mortgage activity slipping to 64 per cent of applications.
The index of mortgage application activit, which includes refinancing and home purchase deman, fell 4 per cent.