In this mid-year market update for homeowners in Victoria, BC, we delve into the recent announcement by the Bank of Canada, which marks the third interest rate increase of 2023.
With the interest policy rate raised to 5.00%, the highest it’s been in 22 years, we explore the potential implications for the Victoria, BC real estate market and provide insights for homeowners navigating these changes.
Bank of Canada interest rate announcement schedule for 2023:
January 25: Increase of 0.25% to policy rate of 4.5%
March 8: Hold at 4.5%
April 12: Hold at 4.5%
June 7: Increase of 0.25% to policy rate of 4.75% (bringing the prime rate up to 6.95%)
July 12 (Today): Increase of 0.25% to policy rate of 5.00%
September 6
October 25
December 6
The Impact of Interest Rate Increases:
The Bank of Canada’s decision to raise interest rates is aimed at curbing inflation and has implications for the cost of borrowing for buyers.
While conventional wisdom suggests that higher interest rates may reduce the number of buyers and lower prices, Victoria’s housing market has remained active. In fact, benchmark prices for single-family detached homes and condos have increased.
Previous Year
(June 2022)
Properties Sold:
612
Active Listings:
2,059
Benchmark Single Family:
$1,408,500
Benchmark Condo:
$615,200
Previous Month
(May 2023)
Properties Sold:
775
Active Listings:
2,189
Benchmark Single Family:
$1,297,600
Benchmark Condo:
$569,300
Current Stats
(June 2023)
Properties Sold:
705
Active Listings:
2,342
Benchmark Single Family:
$1,310,100
Benchmark Condo:
$573,800
Factors at Play:
Several factors contribute to the resilience of Victoria’s housing market, including low supply of housing and the inherent desirability of the geographical location.
We are also seeing the market adjust from a decrease in activity in the second half of 2022, during which eight consecutive policy rate increases took place from March 2022 to January of 2023, bringing the policy rate from 0.25% to 4.5%.
After the January 2023 announcement, the Bank of Canada held the policy rate at 4.5% for several months before the June increase. This gave buyers time to adjust to the new rates in general, as well as time to examine and consider the long-term implications of buying at a higher rate, but within a less competitive market (relative to the peak of the “COVID market”); with many landing on the conclusion that if they could afford to purchase a house in today’s market, they didn’t want to gamble with time waiting for rates to come back down.
Considerations for Variable Rate Mortgage Holders:
Variable rate mortgage holders have felt the impact of these interest rate increases.
Standard variable rate mortgage holders may face adjustments to their payments to ensure principal repayment (AKA hitting their “trigger rate”).
Adjustable variable rate mortgage holders can expect the 0.25% increase to raise their monthly mortgage payment by approximately $15 for every $100,000 borrowed.
Looking Ahead:
Economists predict that interest rates may decrease over the next two years. Although the recent rate hikes have posed challenges, the strength of Victoria’s real estate market provides homeowners with the reassurance of holding equity in their homes.
Next Steps?
Homeowners: Contact us for a free, no-obligation home equity check to gain a deeper understanding of your position in the market.
Buyers: We’re here to help, no matter what stage you’re at, to determine the most effective pathway towards achieving your real estate goals.
Contact us: 250-634-2141 (call or text) or [email protected]
Book a complimentary home valuation: https://calendly.com/alex-nph/30min?month=2023-05
Subscribe to our monthly newsletter & receive our Buyer’s and Seller’s Guides (PDFs): https://northpacifichomes.ca/guides/
Thank you for being here,
Alex Hughes* and Ricki-Lee Jewell, Victoria, BC Real Estate Agents
*Personal Real Estate Corporation
