Manitoba home sales drop in August amid rising cost of borrowing

The Bank of Canada has raised the interest yet again in an effort to combat high inflation.

It's a measure aimed at cooling spending but one that will also drive up monthly payments for some mortgage holders.

Bad news for Manitobans already strapped for cash due to the high cost of living.

"Groceries, gas, basically anything,” said Brie Evans, who’s trying to stretch every dollar, in part by buying in bulk. “Anywhere you want to go it's pay, pay, pay."

In an effort to bring down elevated inflation and the price of everyday items, the Bank of Canada raised the interest rate Wednesday 75 basis points, to 3.25 per cent.

It's a move that will make borrowing even more expensive and could hit some homeowners particularly hard, especially those with variable rate mortgages.

"You will expect to see your rates go up. The big banks offer static payments on their variables but at certain points if the rates go high enough they hit trigger rates and your payments will go up,” said Peter Paley, a mortgage broker with Dominion Lending Centres Mainstream Mortgages.

It’s the latest in a series of rapid rate hikes in Canada which are already being felt in the Winnipeg region's real estate market.

“Clearly, interest rates are impacting our market. It’s to what extent,” said Peter Squire, the Winnipeg Regional Real Estate Board’s vice-president of external relations and market intelligence.

"You’re now having to qualify at a higher rate. You have to meet the mortgage stress test which is another two points above what you've been able to negotiate."

Squire said it took longer for the hikes to make an impact on the area's relatively stable housing market.

New numbers from the board show sales last month were down 15 per cent compared to August 2021 and down nine per cent compared to the five-year average for August.

"Definitely some consumers, some buyers in particular, aren't able to buy what they were looking to purchase,” Squire said.

Paley has been busy fielding calls on the rate hike.

He said while borrowing for a new home is getting more expensive the rate hike may not be bad news for everyone.

"The ones who were in the hot market who sort of held back are finding now is the time that they can actually get a home that they want,” Paley said.

Evans is prepared for more money pressure in the months to come and is just focused on maintaining financial stability.

"Everybody’s got hopes and dreams but right now it's scary,” Evans said. “You're scared to take that step.”

The Bank of Canada said the continued effects of COVID-19, ongoing supply chain disruptions and Russia’s war in Ukraine are factors in higher inflation.

The Bank of Canada is trying to bring inflation down to two per cent so the interest rate is likely to move even higher.

The next scheduled announcement on the overnight rate is set for Oct.26.