The two shoes yet to drop are a few weeks away. Interest rates go up again in the third week of October, increasing the prime rate to 3.2%, taking secured HELOCs to 3.7% and adding about a quarter point to all fixed-rate mortgages, which are already hovering at the 3% mark. If the Bank of Canada’s on a tightening trajectory consistent with the past, four or five more increases are to come over the next 18 to 24 months. That would lift the five-year fixed to 4% in 2019. By historical standards, dirt cheap. For Moisters who thought 2% loans were their birthright, it’s a mess.
The second shoe makes it worse. The universal stress test. All borrowers will be required by the end of 2017 to qualify at the current rate + 2%, regardless of down payment heft. It means mortgage rates will have gone from 2% to 5% in less than a year – precisely what the housing bulls, who like to come here to paw, pee and snort, said would never happen.