Real estate professionals gauge the rate hike impact

Real estate professionals gauge the rate hike impact

Real estate professionals gauge the rate hike impact What affect will the latest Bank of Canada rate increase have on housing markets? Two professionals weigh in.

“It is a modest increase. I think the fact that the Federal Reserve in the United States started off the trend, many in Canada were expecting that the earlier rate increase would happen and that there would be more during the year. I think for the most part, people were bracing for it so we any kind of a panic reaction to it,” Brad Henderson, CEO and President of Sotheby’s International Realty Canada, told “Let’s face it, at 25 basis points … it isn’t going to necessarily overwhelm any buyers or sellers in the marketplace.”

The Bank announced last Wednesday it was increasing its target for the overnight rate to 1%, citing strong economic performance.

“Given the stronger-than-expected economic performance, Governing Council judges that today’s removal of some of the considerable monetary policy stimulus in place is warranted,” the Central Bank said. “Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.

“Particular focus will be given to the evolution of the economy’s potential, and to labour market conditions. Furthermore, given elevated household indebtedness, close attention will be paid to the sensitivity of the economy to higher interest rates.”

And while many argue a rate increase will temper housing demand, one veteran believes it will help kick-start confidence back into one struggling market.

“In my view, before there is an adverse impact there has to be several interest rate hikes. This was overdue; the rate has been artificially low for years now. The major markets will be just fine. With markets like where there was a pause … this might just spur them on,” Dianne Usher, senior vice president of Johnston and Daniel, a division or Royal LePage, said. “There has been a psychological pause in Toronto. I believe we are going to have a very healthy, strong, fall market and this will stimulate it to be even stronger. If supply remains low … we will start to see price increases again.”