Following three rate hikes this year, the release of the Gross Domestic Product numbers for June and the second quarter of 2023 proved that increases to the overnight lending rate have been successful in slowing the economy. The Bank of Canada announced today that it is finally hitting the pause button on the current 5% overnight lending rate, offering some relief to many Canadians. “The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country,” explains the release.

The Impact on the Fall Real Estate Market in Canada

Following the summer stall, interest in real estate typically starts to rebuild for Canadians in the fall, once we’re back to our routines. It’s difficult to say exactly how the fall market will play out following months of unpredictability, however, Zoocasa Broker of Record & Industry Relations Officer Lauren Haw predicts that September could be quiet: “Sellers, afraid of the rate rise and quiet media over the summer, will wait through September to see what prices do before deciding to list or not.”

However, motivated buyers are always out there and low supply could lead to an increase in inventory. “This continued, historically low supply of homes will keep prices buoyant enough to give some sellers confidence, with new listings likely to peak in October,” said Haw.

Extra-Long Amortizations are Becoming More Popular at Big Banks

Although the rate hike hiatus is good news, Canadians are already feeling the pressure of higher rates and turning to extra-long amortizations for relief in monthly payments. In their third-quarter earnings, many of the biggest banks including RBC, TD Bank, CIBC and BMO all stated that 40% of their current mortgage customers hold mortgage loans longer than the typical 25-year mark.

If you’re planning to take on a new mortgage or are up for renewal, a longer amortization period may help increase your monthly affordability. Many of the big banks are now offering periods of 30 years while some alternative lenders may offer up to a 35-year amortization. 

Zoocasa (Sept. 6, 2023, Patti Cosgarea)