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How to Buy a home after the latest Canadian Interest Rate Hike

Posted by Sherwood Mortgage Group on 11 May 2022
How to Buy a home after the latest Canadian Interest Rate Hike

 

In early September, the Bank of Canada made the decision to raise its benchmark interest rates another 0.75% after they had remained at historically low levels over the pandemic. You’ve probably been wondering how to buy a home after the latest Canadian interest rate hike, so we're here to inspire, motivate, and educate you!

You don’t need to take drastic measures that could wind up hurting you down the line, such as overpaying for a fixer upper to save money or panic buying just to get some property even though you don’t love the home. 

Buying your first home can be stressful, but if you keep the following in mind, build a solid plan, and work with qualified mortgage professionals and real estate agents, the process will be much smoother. Let’s dive into some steps we can take to ensure we can afford a home with rate hikes in the picture.

 

Start With Your Budget

When you start the process to buy your first home, you first need to determine how much house you can afford. This doesn’t start and end with your household income and the price of the home though. You’ll need to factor in every aspect of your life ranging from what you spend on transportation and groceries to entertainment and household debts.

By laying all of these recurring expenses out on the table, you can begin to see what life will look like when you throw a mortgage payment into the mix. This is the first step that you should take in order to guide your house hunting. 

 

Experts Say Housing Should Be 23-30% of Your Income

Many financial experts say that your housing costs, which include your mortgage payment, property taxes, utilities, insurance, and all other necessities related to the home should eat up between 23-30% of your total income. Once you start to get over that 30% figure, things can get a little tight for you and your family.

 

Rate Hikes Mean You Just Have to Readjust

Due not only to rate hikes, but also inflation, we just need to readjust our aim because 23-30% of our income doesn’t go as far as it did a year ago. This isn’t anything we can change, but we can change our plan of attack in our house hunt. We can research different neighbourhoods or cities, and we can shave off a little bit of our housing budget so we don’t wind up overexposed.

 

 

Higher Housing Costs Doesn’t Make Renting a Better Option

Yes, housing costs are rising, but so are rental prices! In CMHC's Spring Housing Market Outlook, they have outlined that in almost every major hub around the country, rental affordability will be getting much tougher throughout the year. This is due to the recovery from the pandemic, people returning to the city, and overall job growth in those hubs.

Needless to say, don’t let the recent rate hike sway you into thinking that renting is the only option, because it is not, and history shows us this.

 

 

Connect with a Qualified Mortgage Professional

If you’re still wondering how you can afford your first or next home, reach out to one of our outstanding mortgage agents at 1 - (877) - 241 - 6001 and we will walk you through this process from beginning to end!
 
Author:Sherwood Mortgage Group
Tags:Mortgage NewsMortgage Education Resources

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