Selling A Home Can Be Affected By Higher Interest Rates

The Globe and Mail reported today that interest rates in Canada have been on the rise lately. This can have an effect on the real estate market: 

“On a $300,000 mortgage with an amortization period of 25 years, a home buyer with a 4.99-per-cent mortgage would make monthly payments of $1,743.11, according to RBC’s online mortgage calculator. This would add up to a total interest cost of $222,932 over the life of the mortgage.

At a rate of 6.04 per cent, the monthly payments would increase by $183.45 to $1,926.56. The total interest cost rises by $55,035 to $277,967.”

In this example provided in the article, the higher interest rates results in a higher monthly payment for the buyers. If the highest monthly payment a buyer could receive was $1,743.11 for a $300,000 home, then this means that the buyer can no longer afford a $300,000 home because it now cost $1926.56.

A raise in interest rates means that buyers can afford less than they could at the lower rates and this will affect the housing market and house prices.

For more information on the Globe and Mail article, please click here.

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