Higher interest rates spike mortgage costs in Calgary

Seven consecutive interest rate hikesfrom the Bank of Canada this yearhascooled the housing market in Calgary, as people shy away from borrowing at higher rates.

But at the same time, sellers are holdingoff on making homes available.

According to the Calgary Real Estate Board, sales have fallen over 20 per cent since 2021. But one of the key factors that keeps people out of the market has not changed a lot, as benchmark prices are higher than last year by over eight per cent.

Experts say affordability is still a problem and increasedinterest payments mean it won't change very soon.

"With the increase in interest rates, those mortgage payments have absolutely soared," said Charles St. Arnaud, chief economist with Alberta Central,thetrade association for Alberta's credit unions.

On average, Canadian households are paying over $24,000 more in annual mortgage payments, with people in Vancouver and Toronto on the highest end of the scale, the trade association said.

Meanwhile, in Calgary, the average increase sits at close to $17,000; in Edmonton, it is just under $13,000 per year.

St. Arnaud said it's not only new home buyers who may feel priced out, as existing homeowners who need to renew a mortgage will have to adjust their budgets to manage higher bills.

When looking at the numbers in other markets, St. Arnaud said Alberta is still in a better position, though he expects people will adjust their expectations, looking for homes that will havesmaller mortgage payments.

"There were no signs of over-valuation in Calgary before the rate hikes, there's no big concern there. But it's still obviously more expensive now to afford a house than it was at the beginning of the year, but that's mainly because of interest rates."

Shop around for rates

Mortgage broker Ron Butler said there are a couple of ways for buyers and owners to lessen the pain of increased interest rates, largely by taking some extra time before signing a deal.

"Contact multiple lenders, just to see what is the best possible rate you can get in the marketplace. There has never been a more important time to shop than today," he said.

'There's certainly a bit of hope,' says economist on interest rate hike

2 years ago

Duration 5:08

Chief economist at Scotiabank, Jean-Francois Perrault, reacts to the Bank of Canada raising its benchmark interest rate for the seventh time this year to 4.25 per cent, but signalling that rate hikes could end soon.

Butler said it is possible that the market finds a "sweet spot" where the higher interest costs are balanced out by lower home prices, but it will take a lot of movement in the housing market to make that happen.

"That requires almost an additional 15 or 20 per cent reduction in prices from February of this year," he said. "We're talking a really, really big drop in some regions from where they were."

He is hopeful that interest rates will start to come down in about a year's time.