Those Pesky Interest Rates

By Theresa Grant Real Estate Columnist Interest rates affect everything from Car Loans to Credit Cards, to Mortgages and so many other things. I remember back in the 1980’s, I was perusing the pages of a local newspaper looking at houses for sale. I was living in Toronto, and while prices there were out of reach, Durham Region offered a glimmer of hope. My brother-in-law worked for The Toronto Dominion Bank, yes, at that time it had not merged with Canada Trust. After having a conversation with him regarding purchasing a house, he provided me with a little cardboard slide calculator from the bank. I will never forget the range on that slide. It went from 10% to 24%. When I asked why it started at 10%, he was puzzled, I said something to the effect of what happens if the rate drops to 8% or 9%? I was assured I had nothing to worry about. In 1981, interest rates were crushing. Three little words ruled the real estate market in Canada, Power-of-Sale. Such a sad time for so many. It was common to see power of sale signs everywhere. It seemed like everyone knew someone who was losing their home due to incredibly high interest rates. It would be many years of looking, and waiting for rates to come down, before I was able to purchase my first home. A tiny war-time bungalow in Ajax. I remember going to the bank to fill out the mortgage application and just praying that the numbers would all jive so I would be approved. When the lady from the bank called a few days later to say I’d been approved, I was ecstatic. Not only had I been approved, but the mortgage rate was a ridiculously low 5.9% I recall telling different people that I got my mortgage at 5.9% and everyone reacted as though I had won a lottery! Mortgage rates were indeed on their way down, and I was the very happy recipient of one of lowest rates of that year. It was 1992. Over the years the interest rates have come down. In 2020 they bottomed out at the lowest rates ever seen by some. The thing about interest rates in the real estate market though, is that when rates are low, house prices are high. That’s just how it works. In 2020, Covid-19 spurred a craze in the housing market that drove prices to insanely high numbers. Well above the actual value of the home in many cases. Prices were out of control, but people were getting amazing interest rates. As we know, what goes up must come down, and so they did. In a big way. Homeowners were left holding the bag on huge mortgages, only to find they were facing rising interest rates as their home values dropped drastically. In March of 2022 interest rates started to climb. In May of 2022 house prices started to fall. As we meander through the fall of 2024, we are in a full-fledged buyer’s market, with more inventory than buyers. Interest rates have started to come down again. Our next interest rate announcement from The Bank of Canada is on October 23, 2024. For those holding variable rate mortgages, we are crossing our fingers and hoping for another rate cut as we ride this wave. Questions? Column ideas? You can email me at newspaper@ocentral.com