Interest hikes making home ownership more difficult for 1st-time buyers
The national interest rate is currently the highest it has been since 2001
As the Bank of Canada hikes interest rates again, some British Columbians say it pushes the prospect of home ownership even further out of reach.
New Westminster resident Peter Musser says trying to purchase his first home in the Lower Mainland has been disheartening — and Wednesday's interest rate hike was another blow to his search.
"It feels like housing ... keeps being pulled further away from me," said Musser.
The Bank of Canada hiked interest rates a quarter of a point to 4.75 per cent Wednesday, the highest it has been since 2001.
Last week, a housing affordability report published by the National Bank of Canada showed those in Vancouver with an annual income of $83,966 — the median income there — need almost 38 years to save up for a home worth about $1.58 million, the median price of a home in the region.
Musser, who is from the United States, and his partner, who is from Canada, have started looking south of the border for homes.
He says owning a home in Metro Vancouver was a much more attainable goal for him and his partner when interest rates were in the range of one to two per cent.
"It is hard to see what long-term home ownership would even look like."
Chilliwack resident Daniel Goode and his partner have been actively saving for a downpayment on a house for about three years now.
He says hiking interest rates seems counterproductive to helping first-time home buyers like himself.
"It's pretty depressing to watch as a first-time buyer," said Goode.
A source of inflation
Wednesday's interest raise came as a surprise for Marc Lee, senior economist with the Canadian Centre of Policy Alternatives in B.C., who said he thought the bank was done hiking rates after the last increase in January.
"The problem with interest rate hikes right now is that they actually are a source of inflation for a lot of Canadian households," Lee said on CBC's The Early Edition Wednesday morning.
In terms of whether the increase will bring overall inflation down, Lee says it takes about a year for interest rate changes to fully flow through the economy.
"We are still in a wait-and-see position."
But homeowners with variable mortgages will see an almost immediate increase in their monthly payments, Lee says.
"From the perspective of a lot of Canadian households, it doesn't make sense and is actually counterproductive."
Kelowna-based mortgage broker Ash Simpson says the latest hike roughly translates to a $15-$20 increase for every $100,000 in value.
He says he is seeing homeowners with variable mortgages having to come up with creative, alternative solutions to pay their mortgages.
This includes renting out a part of the home they own, downsizing or selling the home and buying in a less expensive market.
"It's the uncertainty ... we don't know if this is the last one," said Simpson.
- A previous version of this story incorrectly stated those in Vancouver with an annual income of $322,245 need almost 38 years to save for a home. In fact, that amount is $83,966.Jun 10, 2023 12:16 PM PT
With files from B.C. Today and The Early Edition