The Bank of Canada recently announced that its policy rate will be increasing to 4.5%. This decision will have a significant impact on the real estate market, both positive and negative. In this blog post, we will explore five pros and five cons of the rising policy rate for the real estate market.





1.         Control inflation: The policy rate is used to control inflation, so by raising the rate, the central bank can help to keep prices stable and curb any potential inflationary pressures.


2.         Reduced housing bubble: Higher interest rates can help to cool down an overheating housing market, which can prevent a housing bubble from forming.


3.         Increased savings: Higher interest rates mean that savers will earn more on their savings, which can make it easier for people to save for a down payment on a home.


4.         Reduced debt: Higher interest rates can discourage borrowing, which can help to reduce overall debt levels and make the economy more stable.


5.         Increased investment: Higher interest rates can increase the return on investment in real estate, making it more attractive for investors.


1.         Higher mortgage rates: The policy rate directly affects mortgage rates, so a higher rate means that borrowing costs for homeowners and potential buyers will be increased.


2.         Reduced affordability: Higher mortgage rates will make it harder for people to afford a home, which will decrease demand for housing and potentially drive down prices.


3.         Reduced economic stimulus: Higher interest rates can slow down economic growth by discouraging borrowing and spending. This can lead to decreased demand for housing and lower prices.


4.         Reduced access to credit: With higher interest rates, lenders may be less willing to approve mortgages, making it harder for people to access credit to buy a home.


5.         Reduced construction: Higher interest rates can discourage new home construction, which can lead to a housing shortage and slow economic growth.


Overall, the new policy rate of 4.5% will have both positive and negative impacts on the real estate market. While it will help to keep inflation in check, reduce housing bubbles, and increase savings and investments, it will also make it harder to afford a home and borrow money, this will reduce economic stimulus, and decrease construction in the housing market. It is important for homeowners and potential buyers to consider these factors when making decisions about buying or selling a home.