In case you haven’t heard, the Bank of Canada raised the prime interest rate on July 12th for the first time in 7 years. For nearly a decade Canadians have enjoyed historically low interest rates resulting in cheap lending which has accelerated the real estate market. Of course, interest rates don’t only affect borrowing. Coinciding with the recent rate rise the Canadian dollar surged to its highest level in more than a year. With rates expected to continue climbing into 2018, find out what impact this may have on the Whistler real estate market, if any.
A higher cost of borrowing
After a decade of low interest rates it’s easy to forget the pre-GFC norm of rates fluctuating between 4-6 percent. Look back twenty plus years ago and interest rates were as high as 15 percent. Although this rate rise does indicate a turning point, the .25-point rise is minute and we are unlikely to see rates increase as drastically as we have in the past. With predictions of further interest rate increases in 2018, the recent rate rise could cause a surge of buyer demand hoping to secure a fixed term mortgage at current low rate levels. In the long term, if interest rates continue to climb we could see a softening of the Whistler real estate market.
A stronger Canadian dollar
The Canadian dollar has been strengthening since June when speculation around an immanent rate rise became rife. If interest rates continue climbing, as they are expected to do, the dollar will likely gain strength compared to the greenback. Whistler has a large concentration of US property owners who have been enjoying the ‘cheap money’ when buying here in Canada. A strengthening Canadian dollar could see more US investors sell, and may create more inventory in the Whistler market.
Weakened Consumer Spending
Interest rates are increased as a mechanism to temper inflation. Consumer spending is one driver of inflation that will be impacted by costlier lending. Debt heavy consumers will certainly feel the impact of rising interest rates. Overall consumer spending will moderate as financing becomes more expensive.
Over the last few years Whistler has enjoyed a robust real estate market with drastic price gains and record low days on the market. In short, the demand for Whistler real estate has hotly outpaced the supply of homes for sale. Although no immediate changes are expected due to the recent rate rise, a longer-term trend of rising interest rates could help moderate prices and increase inventory on the market.
If you have any questions about the recent interest rate increase, would like to be connected with a Whistler mortgage broker or lender, or are interested in buying or selling real estate in Whistler or Pemberton, make sure to contact Lance Lundy for more information.