How Will Higher Interest Rates Affect Me?

a young couple taking about interest rates in Canada with a mortgage agent and real estate agent based in brampton, ontario. Catherine Nacar is a first-time home buyer realtor, Mississauga brampton toronto, filipino realtor, preconstruction properties

Mortgage interest rates dropped down considerably once the global pandemic began. The Bank of Canada announced on December 8, 2021 that a sharp increase in interest rate is likely possible between April and September 2022. It might be a three times increase during Canadian real estate’s busiest months. When I say interest rates are rising, it not only means mortgage rates but also interest on personal loan, business loan, and others. 

This brings us to the question – how will higher interest rates affect me?

How will the Canadian real estate market react to this? 

Are you planning to buy real estate in 2022? What will mortgage approval look like? How much downpayment do you need? 

a young couple taking about interest rates in Canada with a mortgage agent and real estate agent based in brampton, ontario. Catherine Nacar is a first-time home buyer realtor, Mississauga brampton toronto, filipino realtor, preconstruction properties

Let’s take a step back and analyse the situation: 

Why are interest rates rising? 

According to the Bank of Canada’s website, “at the heart of the Bank’s monetary policy is a commitment to maintain low and relatively stable inflation—in particular, to keep the rate of inflation close to the two-per-cent midpoint of the one- to three-per-cent target range.”

This is why the mortgage interest rates dropped back in March 2020 when the global pandemic hit us. The rates were the lowest they’ve ever been and that was done to protect Canada’s economy. 

Bank of Canada has maintained a low key rate of 0.25% for the last two years. Their rate also helps banks and lenders to set an interest rate. 

How will a higher interest rate affect you? 

Interest rates are lowered in a crisis to encourage people to get loans and mortgages. As the economy starts recovering, interest rates increase. A higher interest rate can affect you in two ways:

  1. Borrowing money will become expensive. 
  2. If you have investments, you’ll receive a good return. 

Now, if you’ve already purchased a home and locked in a fixed mortgage, the increase won’t affect you at all. However, when it’s time for a renewal, you’ll do that at a higher interest rate. 

If you got a variable mortgage, the majority of our monthly payments will be directed towards paying the increased mortgage rate. 

People who’ve bought homes in big real estate markets like Toronto, Brampton, Mississauga, Richmond Hill, Markham, and Vancouver will take the worst hit. Even a 1% percent increase means you’ll end up paying thousands of extra dollars. 

How do I prepare for the increased interest rates?

Whether mortgage rates rise or not in 2022, they’ll be rising eventually. The global pandemic will turn into an endemic and the market will recover. As a prospective homeowner, it’s crucial you improve your financial portfolio to secure the lowest interest rate possible. 

  1. If you have several loans, direct more money towards the loan with the highest interest rate. 
  2. If you plan to buy a home in 2022, get pre-approved immediately. You can lock in the interest rate for up to 120 days. For more information on mortgage approval, visit my mortgage website
  3. Start saving for a considerable down payment. The more money to put down, the less you’ll have to pay through mortgage. 

Buying a home is a stressful journey but I am here to make it simple and easy for you. Hi! I am Catherine Nacar, Brampton’s favourite woman real estate agent. Book a no-obligation discovery call with me today.