The Bank of Canada (BOC) announced a 0.25% interest rate hike, marking the 10th increase since March 2022 and bringing the overnight rate to 5%, the highest in 22 years! The move comes as the Canadian economy, which has been stronger than expected, is expected to slow down due to the impact of higher interest rates. Although recent inflation rates have eased to 3.4% in Canada and 3% in the United States, the core inflation rate remains at 3-4% and has been more persistent than anticipated. The BOC now forecasts a return to its 2% inflation target in mid-2025, instead of the previously projected 2024.The increase in interest rates has had a significant impact on the bond and mortgage markets. The 5-year bond rate has surged to 4%, the highest since 2007, leading to fixed mortgage rates around 5.2% and variable rates around 5.9%. These rates are the highest in 15 years and have further challenged affordability, with monthly mortgage payments increasing significantly.The sentiment in the housing market has also shifted, as sentiment levels have dropped, resulting in reduced spending and housing demand. The labor market has shown signs of weakening, with the unemployment rate increasing over the past three months, which is the largest increase since 2019.Population growth in Canada has reached a record high of 1.2 million in the last 12 months, with non-permanent residents accounting for 60% of the increase. This has put extreme pressure on the rental market, with high rental rates and landlords resorting to renting out individual beds to meet the demand.In the Toronto market, sales have declined by 7% and inventory has increased by 19%. However, sales are still up 15% year-over-year, with a 20% increase in condo volume. Prices have risen by 2.5% in the last month and 9% in the past four months. The investment condo market has become less attractive for investors, with negative cash flow and decreasing rental returns.Looking at Calgary, the housing market continues to strengthen, with home sales rising 5% month-over-month and setting a record for the month. Sales in Calgary were up approximately 10% year-over-year, particularly in the condo segment, which experienced a 50% surge. Overall inventory is at a 10-year low, leading to increased prices.These developments indicate that the already financially strained marketplace is facing further pressure due to the recent interest rate hike, with talks of additional increases and higher rates for the foreseeable future. The housing and business sectors are likely to experience significant shifts if interest rates remain high for an extended period. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 [email protected] Ryan Dash PREC 778.898.0089 [email protected] www.thevancouverlife.com

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“What did the council decide on item 42?” — answered with the speaker and the moment.

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