Purchasing power will be the first casualty of possible rate increases

A chain of possible mortgage rate increases in the very near future might endanger Canadian would-be home buyers’ purchasing power – and ultimately, their mortgage capacity, according to the Canada Mortgage and Housing Corporation.

In its most recent projections regarding the “normalizing” trend of mortgage hikes, the CMHC warned that the in the worst-case scenario, rate increases will total 5.6% this year, 6.2% next year, and 6.5% in 2020.

Together, the nearly 22% increase in rates over the next two years will bite off a serious chunk of Canadian purchasing power, with max mortgage sizes in particular possibly ending up being 11.69% lower than today’s values, Better Dwelling reported.

Read more: Labor market weakness might eat into Canadian purchasing power

This comes in the wake of updated inflation numbers from Statistics Canada, which indicated that Canadian inflation went down from the 2.8% in August to reach 2.2% in September, roundly beating economists’ earlier projections of 2.7%.

The latest data is a definite breath of relief for Canadian households struggling with steadily higher costs this year, especially July’s 7-year peak inflation rate.

Steve Randall