MOOSE JAW — With an upcoming announcement from the Bank of Canada expected on the morning of Wednesday, Sept. 4, several homeowners are closely watching interest rates with many expressing concerns about the end of temporarily reduced rates introduced by the federal government during the pandemic.
To shed some light on the current housing market, Janelle Bookout, a mobile mortgage specialist with the Conexus Credit Union shared a few insights on what homeowners and future home buyers might expect in the upcoming months.
Competitive housing market
Homeowners or those in the market for a home will quickly see that the housing market in Moose Jaw — in alignment with the rest of Canada — is now in a very competitive position.
“We are seeing bidding wars on some properties,” Bookout said. “There is a very large amount of homebuyers, some new homebuyers, and some out-of-province homebuyers sitting on the sidelines. As soon as the perfect property comes up, they jump on it.”
Even though interest rates have skyrocketed, Bookout said this doesn’t seem to deter anybody from making a home purchase.
“What I will say is that the increase to the interest rate hasn’t come up high enough to have a huge impact on the housing market in Saskatchewan,” she observed.
Owing to supply and demand considerations, buyers are accepting higher interest rates because of a shortage of housing options across the province and Moose Jaw is no exception.
Pandemic spending
The unusual situation faced by homebuyers is the result of federal government policy during the COVID-19 pandemic.
“The jump to our interest rates was specifically a result of inflation during COVID,” Bookout explained. “The federal government was scared that… when COVID hit and everything was shut down, that nobody was going to spend money. So, they made borrowing money very cheap and enticing at a one or two per cent mortgage rate…”
The result was, perhaps, predictable: the housing market became deluged across the country and people who were not even looking to purchase housing at the time began putting in offers.
“I believe 2021 was a record setting year (for home purchasing),” Bookout added.
“My opinion is that the situation we find ourselves in right now is not something that anybody has lived through in our adult lifetimes with interest rates having increased as quickly as they did,” she said.
Perspective
“A lot of the concern with the rise in interest rates, I would say, comes from homebuyers who purchased in 2020 or 2021 when rates were at an all-time low and their mortgages are coming up for renewal in the near future — this year, next year, and the year after,” Bookout explained.
She said homebuyers with variable rate mortgages are feeling concerned because of a potential jump from a one or two per cent borrowing rate into a figure that could be as high as four, five, or six per cent when their five-year term comes up for renewal.
Before the pandemic on Jan. 1, 2020, the five-year fixed lending rate was at 3.04 per cent and prime was at 3.95 per cent. The pandemic was announced on Mar. 20, 2020, and by December 2021 the five-year rate was 1.84 per cent and prime was sitting at 2.45 per cent.
This year, prime was at 7.2 per cent in January and in July it was at 6.7 per cent. The interest rate is currently 4.64 per cent as of July 2024 for a five-year fixed rate. This is the contrasting situation that now concerns homeowners.
To justify these concerns, the average price of homes in Moose Jaw was $247,600 in July 2024. This marks an increase of 6.9 per cent compared to July 2023. At the same time, inventory has decreased 26.6 per cent in the same one-year period.
For comparison, it took the past 10 years for inventory to decrease by 51.2 per cent.
The prime rate is the annual interest rate set by the Bank of Canada. All major banks, credit unions, and other financial institutions in Canada use this figure to set interest rates for variable loans including variable-rate mortgages and lines of credit. This rate affects the amount of interest you pay on loans.
Regardless of the economic forecast, Bookout said it’s always a good idea to speak with your financial advisor to explore your options and ensure peace of mind.
To speak with an expert, simply contact your bank or credit union and request an appointment. To speak with Janelle Bookout at the Conexus Credit Union, visit Conexus.ca/Janelle-Bookout.
The Conexus Credit Union is located at 80 High Street West and can be reached at 306-690-1449.
