By now, you might be tired of hearing about yet another interest rate increase. The series of interest rate changes have already worked to cool what we thought was an unstoppable housing boom that started when the pandemic hit in 2020. Then, on Wednesday, December 7, the Bank of Canada made another announcement, and a hefty .50-point hike ensued. This brings the rate to 4.25%, the highest we’ve seen since 2008.

There is some good news. These new rates seem to be serving their purpose of curbing inflation. And it looks like this will be the last change for a while. Still, it could further impact the real estate market, which is already reeling from the previous increases. How will this latest news affect those looking to buy or sell a property? First, let’s look at how interest rates can affect the market as a whole.

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Interest Rates and Real Estate: How They’re Related

Interest rates and the real estate market are irreversibly intertwined.

  • When rates are low, buying activity increases.
  • When the rates go up, the market typically slows.

The Bank of Canada introduced an astoundingly low target rate of 0.25% at the onset of the pandemic amid fears of an economic slowdown. While other industries faltered, the real estate market exploded at a rate that shocked the world.

Buyers scrambled to take advantage of the low borrowing costs. The only problem was that not enough people were selling a house to meet the demand. The result was one of the strongest seller’s markets the country has ever seen.

Bidding wars drove the average price of a house far above what most people, especially first-time buyers, could afford. As inflation also began to rise, governments at all levels came under pressure to bring the situation back under control.

Raising the interest rates was how they chose to respond. The first announcement came in March, but it barely caused a ripple. However, larger increases in April and May began to have a significant impact. All the same, there were enough buyers to support a robust seller’s market, even if sales slowed slightly.

Selling a home successfully may take more patience than it did during the housing peak, but it can still be done. Find out more about what to expect right here.

The Biggest Rate Hike in 20 Years

The hectic market continued until July, when the Bank of Canada shocked the industry with a full point increase, the largest hike in over two decades. That seems to have been the catalyst for change throughout the country.

All of a sudden, homeowners were shocked to discover that they could no longer command hundreds of thousands of dollars over asking. Gone were the bidding wars, the multiple offers, and unconditional offers. To capitalize on the sizzling but fizzling market, more people listed their homes for sale. Now, buyers had options.

They started evaluating their choices, and homes began to stay on the market much longer. Perhaps the biggest surprise to sellers everywhere was the return of conditional offers.

During the peak of the housing boom, a buyer wouldn’t dream of attaching a condition of sale because it would almost certainly cost them the house. But the real estate market can change in a heartbeat, and we quickly saw a transition from an unprecedented seller’s market to far more balanced conditions.

Fast Forward to Today

A few months and a few interest rate hikes later, we are still feeling the effects. For a few months, the Bank of Canada held the rate steady, and the real estate market picked up slightly as both buyers and sellers began to adjust. We were all sure we’d seen the last of the rate hikes for a while, until they announced another one in June 2023. However, even in the face of uncertainty, people still need to buy and sell for various reasons. And they still need a place to live, regardless of the market. Many real estate experts believe the slowdown simply caused a backlog of pent-up demand.

However, this latest interest hike means all bets are off. It could cause the market to stall again, or it may be business as usual as people adjust to the higher rates.

Expert advice is critical in the current market. Why not schedule a seller’s meeting today? There’s no obligation, and you can book for free right here.

How the New Rates Affect Sellers

Many sellers are reluctant to list their homes now in fear of missing out should conditions pick up again. However, trying to time the market is usually a mistake because no one can predict what will happen. You may be waiting for prices to go up again, but what if it takes another six months or two years?

A better approach is to sell and then buy in the same market. For example, imagine you’re upgrading to a bigger home. Your current property will sell for less than during the housing peak in early 2022. You may feel like you’re losing, but you’re not because your new home will also cost less.

If you decide to sell your home during a slow market, there are still many things you can do to achieve the best results.

  • Work with a local real estate agent experienced in all markets who can help you navigate the current conditions.
  • Clean, declutter, and stage your home so it shows beautifully and entices buyers.
  • Market your listing everywhere potential buyers may be looking. Listing on the MLS®, social media advertising, and even print flyers can help you achieve maximum exposure.
  • Above all, price your home strategically for the market. Your real estate agent will help you find the sweet spot that allows you to maximize your sale by attracting the most buyer attention.

What Every Buyer Needs to Know

High interest rates can drive up the cost of mortgages and reduce the amount you qualify for. For many people, especially first-time buyers, this puts the prospect of buying a house off the table for now. But if you have the resources, now is an excellent time.

Lower prices mean you require less for a down payment, which goes a long way toward making your dream home more affordable. If you’re ready, these tips will help you find the right house with the right terms and at the lowest price possible.

  • Again, work with a real estate agent who knows the area. They have vast connections with other agents and may have access to unlisted properties you can’t find otherwise.
  • Get pre-approved before looking at houses so you can act quickly when the opportunity arises.
  • Be prepared for some negotiation, but don’t pay more than you have to. The current market means other listings will be available, so it’s important to know when to walk away.

High-Interest Rates Won’t Last Forever

If you follow real estate news, you may have seen the meme going around, saying, “Marry the house, date the rate.” What does this mean? 

As disheartening as ever-rising interest rates may be, they are temporary. However, your house is a long-term investment. Owning real estate continues to be one of the best ways to grow your equity and secure your financial future.

Do you have questions about today’s market? Email me at or call 416.884.7925, and I will be happy to help.