Will Increasing Mortgage Rates Impact Home Prices?
There has been some discussion recently on Edmonton home prices in relation to mortgage rates. Some believe if there is a rise of mortgage rates, Edmonton home prices should decrease. Logically it makes the most sense for the price of the house to drop when interest rates are rising, but this is not always the case.
This theory of home prices decreasing is typically discussed by future home buyers. As a buyer you would like to think if you are paying higher rates on your mortgage, you should be able to see a decrease in cost somewhere else. Unfortunately, these rates are rising because the economy is in better shape as a result of stimulus money and post-Covid recovery in Alberta. As the economy succeeds, incomes rise, rates go up, and the price of homes will also go up. It's a compounding effect.
A recent study found mortgage rates have very little impact on the cost of the home. The housing market and price increases are affected by things like job growth in Alberta and rising wages.
As the Alberta economy progresses and strengthens, mortgage rates and home prices will fluctuate. It is a misconception that as rates increase, home prices will decrease. Advances in the economy have shown that rates and home prices are more likely to increase together in the coming years.