Interest rate hike leaves uncertainty in Simcoe County

According to economists, key interest rates could jump three-quarters of a percentage point on Wednesday.

The increased rate comes as Canada looks to tame inflation after it reached a four-decade high of 7.7 per cent in May.

Last month, the Bank of Canada rose its key interest rate half of a percentage point to 1.5 per cent, and Wednesday, a jump of 0.75 per cent, will be the third increase of the year.

"Essentially, for every $100,000 of a mortgage, that would result in somewhere around $750 per year," said Steph Quenneville, the owner and broker of Mortage Sense in Barrie.

"Apply that to a $500,000 mortgage, and you're talking about a big number."

The rising interest rate is believed to be one factor leading to the housing market cooling in Simcoe County after record-breaking years during the pandemic.

Houses in Simcoe County were selling on average for one million dollars at the market's peak in late 2021 and early 2022 but have since dropped in price.

"You don't sell a house in 30 seconds. There aren't 17 people waving their cheque books at you. This is normal stuff," said Lance Chilton of Remax Hallmark Chilton Reality.

According to the Barrie and District Association of Realtors (BDAR), although prices have dropped around 20 per cent since the peak, the market remains healthy, with homes selling ten per cent higher than this time last year.

"Earlier in the year, sellers were winning hand over fist now were a little more balanced for buyers who may have been priced out," said Luc Woolsey, the president of BDAR.

The recent news of homes dropping in price comes as a glimmer of hope for new Simcoe County resident Luke Hyde.

The UK native moved to central Ontario in 2018, hoping to purchase a family home eventually. Since then, he's watched prices skyrocket, forcing his young family to rent a while longer to save.

"For me, every one per cent the house rate needs to come down $100,000 to balance itself out, so I'll be paying the same, but I might benefit from that in ten years, maybe," said Hyde.

As first-time homebuyers gauge the market, there doesn't seem to be a clear path back to normality,

The Bank of Canada suggests the rising inflation it's trying to address is caused by domestic and international factors. The central banks say there's excess demand in the economy, while supply chain problems persist around the world.