On January 25, 2023 the Bank of Canada once again raised it's short-term overnight benchmark interest rate by 0.25% to 4.50%. This was a widely expected move by leading economists in Canada.This means that existing and new variable rate mortgages will see the interest portion cost of the mortgage payment increase by a corresponding amount of 0.25% (almost always).
However, it is important to keep in mind that fixed rate mortgage terms are not necessarily affected by this interest rate increase. That is because fixed rate term mortgages are priced based on long-term bond yields.
Obviously, any mortgage cost increase can pose a headwind for a real estate market like the Fraser Valley. It is now anticipated by many economists that the Bank of Canada will be on pause and take a wait and see approach to see how their interest rate increase cycle of the past year is impacting the economy.
The litmus test for the Fraser Valley real estate market will come in the prime spring selling season that is fast approaching.