Another Interest Rate Hike, & The "Stress Test"...

           The Bank Of Canada raised its benchmark rate to 5% today, the highest it has been in more than  22 years. That is the 10th increase in the last 16 months, and the bank says it may not be done yet. 

The whole point of these interest rate hikes is to lower Canada's inflation rate to about 2%.
Unfortunately our inflation rate sits at just over 3% currently, so these higher rates will likely be with us for some time. The Bank Of Canada is predicting we should hit that 2% inflation goal by mid 2025, though they say it is possible another rate hike or 2 may be required to achieve that target.

         Unfortunately for home owners and potential home buyers these higher rates greatly affect your borrowing power, especially since lenders still have to use the Federal Govt "Stress Test".
This "Stress Test" requires lenders to use a rate 2% ABOVE the going rate when qualifying you for a mortgage. This might have been a good idea when mortgage rates were under 2%, but with a 5 year mortgage term of approximately 5.49% today, lenders now have to qualify you using 7.49%, which reduces your purchasing power or new potential new mortgage amount by about 15%! 
(all figures and examples are just estimates) 

          The real estate market has cooled significantly across Canada this past year due to increasing rates, and house prices have dropped accordingly, but the overall appeal of the Okanagan Shuswap has prevented us from seeing the huge price adjustments experienced elsewhere, which is keeping home ownership out of reach of many hard working individuals and families. We can only hope the Federal Govt will get rid of the "Stress Test" now that rates have increased so drastically to make home ownership possible once again for so many people.