The Latest Rate Hike and How Much You Need to Live in Canada’s Urban Centres

This week’s top real estate stories.

By  Jared Lindzon | 2 minute read

Every Friday, Wahi brings you the most important real estate stories from the past week.

Rate Hikes Un-Paused   

After hitting the breaks on rate hikes four months ago — and despite relatively strong economic performance since then — the Bank of Canada made the somewhat unexpected decision to increase rates once again by 25 basis points, bringing the policy rate to 4.75%. In its statement the Bank acknowledged the Canadian economy had a strong first quarter, with GDP growth of 3.1%, and acknowledged that inflation is coming down, but warned that it remains “stubbornly high.” That’s unwelcome news for anyone hoping to purchase a home or renew their mortgage in the coming months, as the cost of borrowing increases further.  

Rate Hike Could Lower the Temperature on the GTA’s Hot Housing Market

Despite high borrowing costs the GTA’s housing market keeps heating up. According to the Toronto Regional Real Estate Board prices increased for a third straight month, rising a seasonally adjusted 3.5% between April and May. A recent RBC report, however, warns that supply is not keeping up with demand, causing some to fear another overheated housing market could be on the horizon. Housing market concerns likely factored into the Bank of Canada’s decision to increase interest rates, and time will tell if the 0.25% hike will be enough dairy to quell this spicy habanero of a housing market.    

Ontario Passes Controversial Housing Bill   

Ontario just passed its big, fat, controversial housing bill. Bill 97, known as the Helping Homebuyers, Protecting Tenants Act,  gives cities the power to expand their borders any time to build more houses, lets tenants install portable air conditioners, and doubles the fines for bad faith evictions, among other changes. Critics — including Toronto’s chief planner and executive director — warn that it also threatens the province’s rental replacement bylaw. The bylaw requires developers that demolish a residential building to provide former tenants a similar unit in the new building at roughly the same price for at least 10 years.     

Homeownership in Toronto Is Just a Quarter Century Away!     

Saving for a down payment in Toronto? All you need is an annual salary of more than $230,000, a savings plan that squirrels away 10%, and a quarter of a century. That optimistic picture brought to you by the National Bank of Canada’s latest Housing Affordability Monitor, which found it would take just shy of 25 years to afford a down payment on the median home price of about $1.14 million at an income of $230,923 — more than double the city’s average. Fortunately, condo owners will only need to save for five years, assuming they earn $165,000 a year. 

Canada Ranks Number One in Mortgage Default Risk        

A new report from the International Monetary Fund serves as a reminder that Canada’s housing affordability challenges aren’t normal. Stacked up against 38 other advanced economies, the Great White North earned the unwelcome distinction of ranking first in mortgage default risk. The precarious financial outlook is thanks to sky-high household debt coupled with inflated home prices. The report notes that when housing prices are on the rise mortgage defaults tend to be low since struggling homeowners can sell to avoid default. With prices below 2022’s peak, however, Canadians are at high risk of having a mortgage they can’t afford.