What Rising (or Falling) Interest Rates Mean for Homeowners
Interest rates have been top of mind for Canadians over the past year, and for good reason. With inflation on the rise and what feels like a steadily growing cost of living, the slightest change in interest rate (whether it increases or decreases) can make a big difference for homeowners. Even a small rate change can affect your monthly payments and long-term plans.
An Overview of Interest Rates
The Bank of Canada sets the “overnight rate,” which influences the cost of borrowing across the country. When the Bank raises rates, borrowing becomes more expensive; when it lowers them, loans and mortgages tend to become more affordable. These changes ripple through the economy, affecting everything from mortgage rates to credit cards and savings accounts.
So, if rates rise:
A rate increase means borrowing costs go up.
For homebuyers, higher rates can reduce affordability, meaning your mortgage approval amount might be lower than before. It’s smart to get pre-approved early and lock in a rate if you’re planning to buy soon.
For current homeowners, if you have a variable-rate mortgage, you’ll likely see your monthly payments increase. Fixed-rate homeowners won’t notice immediate changes until renewal, but budgeting for a higher payment in the future can help you stay ahead.
And if rates fall:
A rate drop often brings opportunity.
For homebuyers, lower rates can make homeownership more accessible, as your borrowing power increases and payments become more manageable.
For current homeowners, this might be a good time to consider refinancing if your existing rate is higher. Lower rates can help you save on interest or shorten your amortization period.
Ultimately, whether rates are rising or falling, staying informed helps you make confident decisions. If you’re planning to buy, sell, or renew your mortgage in the coming months, reach out. Let’s review your options together and find the best path forward for your goals.
Amy Marquis
REALTOR®
289.314.4854
