Rising interest rates hitting new B.C. homebuyers

Rising interest rates and falling home values are putting pressure on some new homebuyers in B.C. who may have leaped into the market at or near its latest peak.

There are worries more people are having trouble keeping up with variable rate mortgage payments, and they can’t afford to sell as home prices fall.

“A lot of people have taken a lot of debt to buy properties at prices that may not reflect current macroeconomic conditions — in particular, interest rates that have more than tripled in many cases in a pretty short span of time,” Thomas Davidoff, an associate professor at UBC’s Sauder School of Business, said.

“When their loans come up for renewal, they are going to owe a lot more every month than when they signed on, and they may have a property that’s worth less than what they owe.”

Davidoff says it’s a cautionary tale for buyers.

“The moral of the story is there’s a big fear of missing out — if I don’t [buy] a property today, I may never get in — but the thing is, buying does not eliminate risk. There’s no guarantee that the price won’t wind up having been excessive and low-interest rates today don’t mean low-interest rates forever. Some people may have gotten themselves into nasty positions through mistiming the market,” he tells CityNews.

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