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Interest Rate Hikes; how will it affect home buyers and developers?
Interest Rate Hikes; how will it affect home buyers and developers?
How do rising interest rates affect real estate and home buyers?As of July 12th 2023 the interest rates by the bank of Canada have increased by 0.25%, makingall rates 5.0% and the bank prime rate 7.20
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This is the first time interest rates have begun with a 5. By 2025 Canada is expected to see lower rates as starting with a 2. What does this mean, why do interest rates chance?

What is the goal of increasing interest rates?
Interest rates determine how much an individual will have to pay to obtain a loan. Interest rates often increase during times of inflation. The hike in rates will destimulate consumer spending which will result in the cost of goods and services to lower. This is a long term tactic used to slow the economy to obtain balance again.

How does interest rates affect real estate?
When interest rates increase, the home purchase demand decreases. The cost of being a homeowner has gotten more expensive for individuals to afford, persuading them not to buy. As the market's purchase habits change, home prices begin to decrease to meet the needs of individuals.
When interest rates decrease the market demand increases. This can result in a rise of home prices.

How does it affect developers?
The consumer price index (CPI), is directly affected by interest rate hikes. This measures the change of the amount paid for goods or services. If the cost of developing increases the consumer price index will increase as well. Canada is still recovering from a disruption in the supply chain, increased interest rates can also lead to an increased cost of building materials.
To keep the cost down, development projects and labor efforts are reduced.

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