Existing owners somewhat immune, but rising rates will hit new buyers hard, bank says

After two hikes this summer, the bank is expecting four more rate hikes by the end of next year, which would put Canada’s central bank rate at two per cent — a level it hasn’t reached since before the financial crisis of 2009.

That would have a “significant impact” on mortgage holders, especially in markets where consumers have taken on very high levels of debt to cover expensive housing.

“All markets would be affected, but the effect would be most substantial in high-priced markets — almost seven percentage points in the case of Vancouver,” the bank said.

“The days of ultra low interest rates in Canada are over,” Royal Bank said. “These increases are just the beginning of a hiking campaign.”

But the picture doesn’t quite look so bleak everywhere across the country.

“It must be said, however, that extremely poor affordability in parts of Ontario and British Columbia skew Canada’s overall picture. Outside of these two provinces, housing affordability trends generally have been more stable,” Royal Bank said.

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