Arsh Syed, Real Estate Agent & Founder at Real Estate in Toronto

Real Estate in Toronto – REIT

Discovering the best of Toronto's real estate, from downtown condos to suburban family homes

The Impact of the Bank of Canada’s September 2022 Interest Rate Hike on the Toronto Real Estate Market

he top five-year fixed rates currently are at 4.96% monthly payment $2,317 on a $400,000 mortgage is among the better rates of any fixed-rate mortgage option

The Bank of Canada raised its benchmark rate for the fifth time this year on September 7, 2022, and it is likely to have a significant effect on the Toronto Real Estate Housing Market.  However, it is difficult to make assumptions about the impact of this increase because of the vast range of home sizes, prices, and attributes on the market. 

Homebuyers will be affected since the higher cost of getting loans will increase their monthly payments, regardless of the initial purchase price. We tend to be fairly conservative borrowers in Canada, and the most popular mortgage product for years has been the five-year fixed mortgage, so only a small percentage of individuals (approximately 20%) will actually have mortgages that are up for renewal this year.

It seems like a sudden shift based on how last year you could list your house and sell it for almost hundreds of thousands of dollars over asking, but this year houses are sitting on the market for four to seven weeks and perhaps you are not even getting close to what you put it on the market, Which is not normal after a time when the market was too hot. The same thing happened in 2017-2018 when the market went up by tens of thousands of dollars.

We have seen an upswing, which is a regular seasonal thing that comes in the autumn every year, and that was really satisfying. But, this hike in interest rates we have to watch how it makes a difference as the fall progresses. 

Indeed, in February, the number of homes sold in the GTA Area for less than $600,000 increased by nearly 70%, while the number of homes sold for more than $1.5 million fell by the same percentage. This is the general trend we are seeing in the market right now. While interest rates are going up, it is getting more expensive to manage your mortgage, but in the GTA home prices are declining, but not everywhere in Canada.

It’s too soon to tell whether this year will end up being a complete smooth or whether home prices will end up being a bit higher or lower than they were at the beginning of the year. However, we did see the most drastic price changes earlier in the year, and home prices have been more stable throughout the summer. The next several weeks of autumn will reveal a lot about the current circumstances. 

When the Bank of Canada raised interest rates by 75 basis points in September 2022, the variable-rate mortgages became more attractive.

If you took out a variable-rate mortgage when interest rates were low, so be on the lookout for letters from your bank soon because your mortgage payments will likely increase as a result of the September 7  rate hike. 

When you make your monthly mortgage payment, some of it goes toward paying interest on your loan and part goes toward paying down the principle, so if interest rates go up, the principal component of a variable mortgage also called as the natural mortgage rate can work as a buffer for you.

Keeping your variable mortgage payment at the existing five-year fixed rate. You will not only have a buffer if interest rates rise, but you will also be able to take advantage of the lower variable interest rate by assigning more of your payment to principle repayment.

To keep your monthly payment the same as interest rates rise, large banks offering variable rates will likely reduce the amount of principal you pay down and increase the interest you pay instead. However, this strategy may not work forever. 

If interest rates rise too sharply, the principal pay down buffer may not be sufficient to cover the extra interest, and your monthly payments will start to rise.

Other types of variable-rate mortgages may also be affected by the trigger rate. Those who bought a mortgage after the March 2022 rate hike will still experience an increase on variable mortgages if the prime rate climbs to 5.7%, while those who got a mortgage in April 2022 or later will also an increase. 

As we usually seek for at least a few hundred dollars in positive cash flow when we purchase freehold investment properties. Therefore, the positive cash flow will mitigate the effect, if not altogether. 

Investor vs. End-User

End User & Investor are two sorts of real estate investors based on their interest and purpose for buying.  An end user buys a home to live in it, whereas an investor buys to make an investment that will increase in value.

Condo investors are in a unique position because their cash flow is negative to begin with. As a result, an increase in mortgage payments will undeniably weaken their holding power. Similarly, end-user home owners will see relatively weak holding power here because these extra costs must be paid for by them.

The top five-year fixed rates currently are at 4.96% monthly payment $2,317 on  a $400,000 mortgage is among the better rates of any fixed-rate mortgage option. This is because consumers prefer the convenience of not having to worry about renewing their mortgage for a full five years.

Since rentals have gone up to help improve cash flow, condo investors will do a little better than end users in the current market. And freehold investors won’t be affected by this rate increase because they already have a positive cash flow and, because rents have gone up, they have more money to cover the big increase in mortgage payments. 

When comparing investors and end users, investors do have more influence and leverage.

Cash flow is greater for multi-family houses than single-family homes, which are better than condominiums, and time on the market is still another aspect that may help you increase your holding.

By increasing your loan’s amortization duration, you may reduce your monthly payment and in the long run, save money on interest.

If you have been considering Buying, Selling, or Renting your home or have avoided the notion due to a negative experience, let Arsh Syed, a Real Estate Agent in Toronto, manage the deal. 

His experience and understanding have been indispensable. He desires Toronto’s housing crisis to improve. He wants to establish relationships and spread the word about his exceptional service, increasing the likelihood that renters and property owners would place their faith in him.

Arsh wants property owners to know that by hiring him, they are drastically reducing risks, saving time and saving money.

For further information about his services, please visit or contact (416) 844-2217


For more interesting blogs, please visit: 

Leave a Reply

Your email address will not be published. Required fields are marked *