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Over the past few years, it’s become increasingly difficult to go a day without engaging in a conversation or reading a headline about the real estate market. With the recent rise in mortgage rates as well as talks of a further increase come October, real estate continues to be a hot topic. And it’s no wonder. The Bank of Canada Overnight Rate saw the largest increase earlier this July since 2010, from .5 to .75 of a percent.

Whether or not you currently own a home or are thinking of doing so in the near future, it’s important to have a clear understanding of how these rate changes will effect you. Thankfully for our readers, we’ve sifted through the click-bait and along with our expertise, composed this handy guide!

If You Currently Own a Home: Fixed Mortgage Rate

Those with fixed mortgage rates will see an eventual change, it likely won’t have as significant of an effect (or as quickly) as variable. In other words, if your rate is locked in, you’re safe for now.

It’s predicted that the central bank will be raising their rates by 25 basis points (one hundredth of a percentage point) later this year in September or October. If you are reaching the end of your five-year fixed term, for the risk-averse it’s advisable to try and lock in another 5 years. According to an article in The Star, homeowners with fixed rate mortgages “should focus on paying down their debt with whatever additional payments they can afford in order to reduce the effects of rising rates.” No reason to panic quite yet, but it’s always best to be prepared.

If You Currently Own a Home: Variable Mortgage Rate

If you have a variable mortgage rate, it will go up. You have to ask yourself how much risk you’re willing to take on. If you’re financially prepared for another hike, you may end up saving money in the long run if the rates decrease if you can stick it out now. If you have a variable rate, it’s likely that you’re not afraid of a little bit of risk and the thought of another increase isn’t causing you to lose any sleep. If, however, you feel as if your mind is changing, switching to a fixed rate may give you peace of mind (you may have to pay a penalty) but for some the stability is worth it.

If You Are Thinking of Purchasing a Home

In short, if the Bank of Canada increases their rate it will put pressure on fixed mortgage rates to rise at some point as well, meaning you need to take that into consideration when budgeting for a new purchase. A quote from a recent Global News article states that “when an interest rate move is widely anticipated, fixed rates generally adjust ahead of the central bank’s announcement. According to some analysts, fixed rates on Canadian mortgages have already absorbed today’s move”. It’s advisable to use a mortgage calculate (like ours – click here!) to get an idea of what your future monthly payments will be with your current purchasing budget.

In summary, these changes are predicted to settle the housing market overall. House listings saw a decrease in listings, however, the condo market has stayed resilient. In fact, the average price of a unit in Toronto just reached $566,513 in Q2, a 28.1% increase from the same time last year. If you’re a homeowner and are interested in finding out what your property is worth in this market, or if you’re looking to make a purchase, our experts are ready and willing to provide advice and guidance. We’re only an email or phone call away, so what are you waiting for? Get in touch with us today!

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