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Interest rate hikes may impact residential real estate markets

A recent report from a Canadian bank is comparing how rising interest rates will affect the residents of different provinces differently. The report speculates that Alberta's households will be hardest hit by the increase. Residential real estate is typically more affordable than properties in Ontario and British Columbia, however experts say that they are more vulnerable to interest rate hikes than these provinces.

The report measures the increase in debt-service payments that individuals in different provinces would expect in the case of interest rate hikes. In Alberta, a 1per cent increase in interest rates would annual debt services costs to the tune of $1,200 to each household. British Columbia is the next hardest hit province at $1,100, and Ontario is slightly lower at $1,000. Residents of every other province can expect debt-services costs to increase $800 or less.

The high influence on these increases in Alberta is due to a few factors. Average household liabilities in the province are higher due to the 2014 economic downturn. Additionally, 18 per cent of mortgage borrowers in Alberta have terms of two years or less, which is significantly more than other provinces.

Currently, the benchmark rate from the Bank of Canada sits at a 1.25 per cent. It expected to raise its benchmark rate to 1.75 per cent by the end of 2018, according to the median of 16 forecasts in a Bloomberg survey of economists. It is worthwhile for those in the residential real estate market to consider these possible interest rate increases when making buying and selling decisions. An Alberta lawyer can help clarify the legal aspects of getting a mortgage as well as supporting other legal matters in buying or selling property.

Source:, "Alberta households are extremely vulnerable to higher rates", Ephraim Vecina, April 4, 2018

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