Recent changes in interest rates are causing ripples of concern among residents and experts alike locally and beyond.
For years, ultra-low interest rates fueled a surge in real estate demand, driving up home prices to historic levels. Now, the tides have shifted as interest rates have risen rapidly to levels not seen in a generation.
Marty Rops, Libro’s Regional Manager for Huron Perth, expressed his perspective on the housing challenges.
The inflated value of real estate is really pinned on one essential problem, according to Rops.
Average mortgage payments are expected to soar by 14% to 25% in the next year compared to early 2022. Looking further ahead to 2025 and 2026, payments are projected to increase by a staggering 20% to 25%.
He says that while increasing interest rates has had a marginal effect already, the real impact will be seen when mortgages established when interest rates were at their lowest from 2019-2021 come up for renewal after five years. Rops thinks this means that we will have a more complete picture in 2024-2026.
He says that many people in that boat will be jumping from 2 or 3 percent, and will likely see a jump to 6% or higher when they renegotiate.
Canadians are known to prioritize home ownership and housing stability over other things, as a result Rops believes that people will likely increase their debt load in other ways to make ends meet, increasing credit card debt, or lines of credit to keep up on their mortgage.
When it comes to the age old question of whether homes will get less or more expensive, Rops says that it’s likely that homes on the floor will not drop much, but says that there’s likely room in the market for homes that are valued at over $1 million to drop.
Rops says that there’s hope in the trend that many local municipalities are encouraging density – the battle is encouraging everyone to get involved.
He says that the shortage of housing is having real world impacts, like decreased labour force, increased cost of living across the board, and migration to more affordable areas.
Written by: B. Shakyaver
