The latest gift to Canadians from the Bank of Canada is a 50 basis point rate hike in June. Politicians, news headlines, economist surveys, and banking executives all take it as a given that the BOC has no choice but to jump up rates to tame inflation which has been stubbornly strong in recent months. The last time the BOC unleashed back-to-back 50 basis point rate increases was in late 1997 and early 1998, a time of rapid economic growth and a booming stock market but with low inflation – a product of the dot com boom. There are also strong expectations that rates will go up again in July, with a brief pause, and then followed by another rate hike in September. Some economists see the BOC bank rate at 2.5% by September. Even if this hypothetical scenario plays out it is important to note that those rates would still be extremely low by historical scenarios.
For those who are concerned about rate increases, keep in mind that throughout late 2018 and 2019 rates were held steady at 1.8%, and before 2008 rates were well over 4%, we’re still in a very comfortable position. The BOC will be under titanic pressure to keep coming rate increases reasonable given the economic and public debt conditions which COVID exacerbated. The rising rate environment we’re now in has seen the pace and intensity of real estate offers slow down. Realtors have repeatedly spoken about the 180 degree change in the market, with properties that once received 12 bids now down to 2. This pause is a strategic opportunity to recalibrate. Given that fewer and fewer homeowners are selling their properties and we’re seeing supply dry up even more so than before. This is leading to prices still going up and not plateauing as one could expect. The dry up of supply and the positive front on prices shows that many of the underlying forces driving demand are still out there: people with cash, good jobs, good credit, and wanting property. Rising rates don’t mean people won’t want homes.
Use this pause to renovate your home! Or take advantage of the high equity you have to consolidate debts. A Tembo loan to renovate can help facilitate a simple project, like finishing up a basement, or polishing up a kitchen, or it can underpin large-scale changes: landscaping overhauls, a complete appliance overhaul, energy retrofits, structural changes or building add-ons, or a combination of many different projects at once – Tembo is flexible. The pause in the market now is a great opportunity to maximize value. Even a basic, standard overhaul of a kitchen with new appliances and marble finishes can add tens of thousands of dollars to the value of your home and can be accomodated quickly and affordably at Tembo. Do not underestimate the potential of your home and the home renovation options you have at your disposal in this market. A Tembo home renovation loan can be a complete game-changer.