Rate Hike Cycle Pause with Direct Projections for Real Estate and Mortgages in Canada

Published January 30, 2023 by Real Estate Leads

5 days ago the Bank of Canada raised the benchmark interest rate by 0.25 basis points, as it was long expected to do and a continuation of what has been going on as the central bank in Canada does what is needed in the face of extreme inflation in the country and in North America as whole. This would not have any reason to be seen favourably from the perspective of the real estate industry or mortgage interests, but what is seen as good news is that BoC also stated at the same time that it was going to pause the interest rate hiking cycle.

This was done based on signs of a strengthening economy, although one that is still precarious and we’re certainly not out of the woods when it comes to onset of a possible recession in Canada. This is for economists to comment on and not anyone blogging about realtors and the real estate industry, but there certainly are some direct connection and predictions about the cycle pause will work to affect real estate and mortgages in the country.

Any uptick in the real estate industry isn’t guaranteed, and the ‘downturn’ is definitely what’s showing on the thermometer, but for real estate agents who find their business has cooled too then our online real estate lead generation system here at Real Estate Leads is an excellent and affordable resource to get your new client generation efforts creating the results you want from them. But with that understood, let’s segue back onto topic and look at the bigger picture significance of this recent news and what it may mean for real estate and mortgages in Canada.

Promoting Buyer Activity

The consensus seems to be that while no rate increase would have been most ideal, a point-25-basis point increase was where the bank needed to be in the big picture. And it’s also fair to say that this more marginal increase means that interest rates aren’t going to be in the news to the same extent. And these smaller rate hikes stopping or slowing should promote more of what are being referred to as ‘missing transactions’ where those with the capacity to buy but have remained on the sidelines will be getting back into the market.

It’s fair to assume that these buyers have been reluctant to do that to this point because they have been making the connection between rising rates and prices and – quite simply – they don’t want to buy a house that might be worth less than the purchase price in the potentially very near future. By giving them some price certainty it will be more conducive to them entering the market.

However, they’ll still need to be comfortable with paying 5 or 6% cent on their mortgages while other buyers that purchased before them are locked in at 2%. There are still plenty of relatively new homeowners out there with that type of mortgage rate and seeing you’ll be paying 5% is still going to put a damper on consumer confidence and this is why there won’t be the uptick in buyer activity that some might hope to see with the assurance that rates won’t be hiked again anytime in the foreseeable future.

Muted Recovery

This is lead real estate industry experts to be forecasting what they are calling a ‘muted recovery’, but what is also being foreseen is more enthusiasm for variable-rate holders who may be considering renegotiating their mortgage – and in some cases doing so to reorient their finances with an eye to purchasing more real estate.

Those with variable-rate mortgages or home equity lines of credit (HELOC) will see their rate increase by a quarter point, and that bumps up the sum of their total rate increases in the last 12 months to 4.25%. Seeing that rate hikes are going to be paused and perhaps halted provided inflation tracks in the right direction they may be more encouraged to make additional moves in the real estate market.

All of this is dependent of course on whether or not this latest rate hike hasn’t taken them to their trigger rate, the term used for when an existing mortgage payment is no longer covering a buyer’s monthly interest. But provided it hasn’t done that, they may have a more ambitious outlook if the rate cycle pause looks like it will be leading to a full cease in rate hikes if the economy starts doing better and inflation starts to be in check.


Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered only to you. These leads are generated from Internet Marketing platforms and a proven to be effective in producing leads that put realtors in touch with would-be buyer or sellers that are genuinely considering making a move in the market. It’s a great way to supercharge your client prospecting efforts, and speed the development of your real estate business as well as letting you establish yourself as a leading realtor in your area.