As rates rise, mortgage payments increase. It’s a contributing factor to surging home sales across the country: buyers don’t want to lose out on their low <3% rate holds. But what happens when that pulled-forward demand has ended?
The following excerpt is from Scotia Economics Global Views released today:
The question facing Canadian housing is whether recent resale strengths are sustainable, or temporarily brought forward and risking a later curtailment through the exercise of rate commitments that are being repriced higher.
The chart shows mortgage payments and house prices under the pre-rate shock environment in the Spring versus the higher rate environment now versus the blue bar that captures what would happen if the full cost of funds shock were to be sustained across the industry and hence fully passed on. This payments shock is coinciding with a slowdown in job growth this year (Source)
Do you think the average Canadian house will fall in price by ~$30,000 due to higher interest rates?
Related post: What impact will rising rates have on housing?