Interest rates are on the rise and are expected to increase gradually over the year as the Bank of Canada starts to tighten it's monetary policy.
There is still a considerable gap between fixed rate and variable rate mortgages at the moment. Before you rush to the bank to lock in, consult with your mortgage broker.
The allure of safety is compelling, I know, but as it stands now it would take 6 rate hikes for the variable to catch up to the fixed rates. The banks love to feed on the fear and promote the fixed rate because they make more money.
And, keep in mind that the penalty to get out of a fixed rate mortgage is substantially higher and so are the rates.
The good news is that the stress test is expected to remain flat, meaning they won't spike to keep in line with rising rates.
There is a lot of speculation on how the rate hikes will affect the market. I suspect that there will be an initial push from the buyer side as anyone who has locked in at a pre-approved interest rate will rush to find a home before this expires. Beyond that, higher borrowing costs along with increased inflation will reduce consumer demand resulting in a more balanced market.
This won't happen overnight, with the low levels of inventory we are currently at it will likely take 18-24 months for the market to fully recover.
Keep in mind that while the Bank of Canada should be doing tempering an over stimulated economy, they likely won't be in a mad rush to do so. Normalized interest rates will cool the economy and we have a massive debt burden. While inflation is riding high, the debt to GDP ratio is being lowered.
Major source: British Columbia Real Estate Association