Chris  Chan

Chris Chan

Sales Representative

TRUSTWELL REALTY INC. Brokerage

Mobile:
416-856-7123
Office:
416-498-9995
Email Me

What is interest rate hikes? What does that have to do with the real estate market?

In recent years, the Bank of Canada has been faced with the challenge of balancing the need to keep inflation in check while also promoting economic growth. One of the key tools that the Bank has at its disposal is the interest rate. When the Bank raises interest rates, it makes borrowing more expensive and can help to cool down an overheating economy. On the other hand, if the Bank lowers interest rates, it can stimulate spending and encourage growth.

Inflation in Canada has been a concern in recent years, with the rate rising above the Bank of Canada's target range of 1-3%. One of the primary drivers of this increase has been the rapid rise in housing prices, particularly in major urban centers such as Toronto and Vancouver. Additionally, supply chain disruptions related to the COVID-19 pandemic have led to shortages and higher prices for goods such as lumber and other building materials.

To address these inflationary pressures, the Bank of Canada has recently signaled that it may begin to raise interest rates in the near future. The Bank began raising rates in the second half of 2022, assuming that the economy continues to recover from the pandemic and inflation remains elevated.

While higher interest rates may help to cool down inflation, they can also have negative consequences for the economy. Higher borrowing costs can lead to lower consumer spending and reduced investment, which in turn can slow down economic growth. As a result, the Bank of Canada will need to carefully balance its policy decisions in the coming months to ensure that inflation remains in check while also supporting a strong and sustainable economic recovery.

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