Expected rise in interest rates no reason for homebuyer panic, industry says

Interest rates might be going up, but New Brunswick realtors expect a minimal effect on the housing market across the province.

"It's not going to drive a panic for people to say, 'OK, you need to buy before these go up,'" said Jason Stephen, a real estate agent with Royal LePage Atlantic in Saint John.  

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The Bank of Canada will announce its rate Wednesday, and economists are predicting the overnight rateof 0.5 per cent will rise 0.25 per cent, the first increase in seven years.

"We live in a very affordable market really for the whole province right now," Stephen said. "New Brunswick is one of the most affordable spots to purchase a house." 

Stephen said with the last round of mortgage changes brought in by the federal government, people needed to get approved on a higher rate than the Bank of Canada rate, which could be two per cent higher than the best contracted rate that people are getting from different banks.

The idea that interest rates are going to stay low for a long time is really coming to an end and this is signalling that.-Dan Noel 

"It may suggest they're going to pay a slightly higher interest rate but … 0.25 won't decrease people's affordability to enter into the home ownership game," he said.

"It just means they might pay, over the stretch of the mortgage, they may pay a little bit more interest."    

Mary Schryer of Mary Schryer and Davis Schryer Realty with Re/Max, says there's been an increase in sales of about 12 per cent over the past year from the St. Stephen to Sussex area.

Although, the Bank of Canada could be increasing its rates and banks have already increased their rates last week, she said interest rates are still low for homeowners. 

"I believe the market will continue to be strong in this area," she said. "There's no indications of it slowing down.

"I don't think we'll see any interruption in the market going forward unless there's big changes within the Bank of Canada, but I don't see that happening."

Dan Noel, a portfolio manager with Wyverstone Capital and I-A Securities in Moncton, also doesn't think an interest rate increase will have a significant impact.

"We're just seeing a stretched consumer and any hint of interest rates are tending to scare people, and rightly so," he said. 

Noel said the average debt-to-disposable income ratio in Canada is 168 per cent. 

"The idea that interest rates are going to stay low for a long time is really coming to an end and this is signalling that," said Noel. 

"In order to maintain the goal of keeping inflation between one and three per cent typically what's used is interest rate increases."

Strong economy means higher interest

He said the Bank of Canada might be increasing the rate because the economy is doing better than expected. 

Even New Brunswick's jobless rate inched down to 8.1 per cent in June, and hasn't been this low in almost eight years.

According to Statistics Canada, New Brunswick's jobless rate was at eight per cent in November 2009.

The June numbers mean Canada's economy has now added jobs in all but two of the last 12 months, for a total of 351,000 new jobs over that time, most of them full-time.

"Any time there's an interest rate increase ... those are really forward looking indications," he said. "It is expected the economy will continue to improve."​