| Toronto Real Estate

Another Interest Rate Hike: What Will Happen To Toronto’s Real Estate Market?

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What will happen to the Toronto real estate market in light of last week’s significant rate hike? It was the sharpest increase since 1998, and some news sites are reporting that it’s “like a hammer” to the housing market. However, we believe much of the fear is unwarranted. Housing values have soared out of control over the last two years, which hurt everyone, even sellers. Why?

As a homeowner, you may have rejoiced to get $100,000 over your asking price, but your celebration might be too early.

What happens when you go to buy a new home? If prices had continued their meteoric rise, you might not be able to get back into the market even after commanding a hefty amount. Many sellers found themselves in this exact situation and had to rent or move in with relatives to wait it out.

For buyers, the news of falling prices is long overdue.

The only people who truly benefited from the out-of-control market were the rare people who sold their homes with no intention of buying a new one.

Why Such A Steep Increase?

The full percentage point increase is the biggest jump in nearly twenty years, bringing the current target rate to 2.5%. We all knew another rate increase was coming, but why did it have to be so high? The Bank of Canada is under tremendous pressure to bring stability back to the economy. With inflation on the rise, people are feeling the pinch as the cost of everything goes up. 

The rate hikes in April and May had already started to impact the market. As the cost of borrowing went up, many buyers put their plans on hold. Homes began taking longer to sell. In addition, more homeowners listed their houses for sale in the hopes of cashing in before more rate hikes went into effect.

More options with fewer buyers meant less competition, and housing prices finally started to cool off.


Knowing what’s happening in the market is imperative to helping you achieve your goals. Catch up with some of our most recent posts below:


What Will Happen Now?

It’s impossible to predict what will happen in any real estate market, especially in a city the size of Toronto. One small event can cause a chain reaction, and we never know which way prices will go. For example, did you know that everyone thought the housing market would crash when the pandemic hit in late 2019? No one would want to buy a house during a lockdown, or so all the experts told us. Now we know how wrong they were!

However, we can make our best guess based on what has happened in the past and current information. Generally, when interest rates go up, inflation slows down, and so does the housing market. 

A further market correction would not be surprising, but it would be very welcome to many.

What Buyers Might Expect

The shifting market is bittersweet to anyone looking to buy a home in Toronto. They may feel ecstatic that prices have finally come down, but much of the savings will be offset by higher interest. Is there any way to insulate yourself from the increased cost of borrowing?

  • Save as much as possible for your down payment. Paying more upfront decreases the size of your mortgage and means you’ll pay less over time, even with the higher percentage. If you’re a first-time buyer, you can use the Home Buyer’s Plan to pull as much as $35,000 from your RRSP without tax penalty.
  • Choose the shortest amortization period your budget will allow. Your monthly payments will be higher, but you’ll pay your mortgage off faster, with less interest overall. Before choosing your payment term, you might want to talk to a financial advisor, however. Paying off your mortgage early may be a dream come true, but you don’t want to leave yourself short in the meantime.
  • Talk to your mortgage expert. There are different types of loans and various payment terms. You never know what is available until you look at all of your options.

Thinking about buying? The timing is better now than it has been for the last two years:


What Sellers Might Expect

Despite everything you might have heard, conditions are still very favourable to sellers. The hectic pace we saw at the peak of the housing boom may be over. However, homes are still selling, and prices remain higher than they were this time last year.

The best thing you can do as a seller is to follow all the steps and prepare and market your home thoroughly. 

Earlier in the year, a few shortcuts wouldn’t have hurt you because buyers had very few options. Now it pays to do everything in your power to appeal to buyers, including:

  • Thorough cleaning and decluttering
  • Minor repairs and updates
  • Improve your outside curb appeal
  • Getting a pre-list inspection

Want a step-by-step roadmap to prepare and market your home? Here’s a great place to start.

Consult With A Real Estate Agent

Working with a local real estate agent who understands your neighbourhood and the micro-pockets within it makes any transaction easier, no matter what the market is doing. However, professional expertise becomes even more valuable when conditions start to shift. 

Are you thinking of making a move but feeling nervous about recent events? We can help. Reach out to us below to schedule a free, no-obligation meeting with us.