The Bank of Canada has recently increased the interest rate for the seventh time this year, causing concerns among many homebuyers. I interviewed mortgage specialists Mark and Eric from the Ottawa Mortgage Shop to shed light on the situation. They explained that the qualifying rate for a mortgage has risen along with the interest rate, making it difficult for buyers to get into the market. The qualifying rate is calculated at the five-year fixed rate on an insured mortgage plus 2%. The economy is still overheated, which is why the Bank of Canada is putting pressure on interest rates to calm it down.

Mark and Eric went on to explain how the rising interest rate affects different incomes and purchase prices. For example, a person seeking a $500,000 mortgage will have to pay around $2,438 per month and must have a total household income of $110,000 with no debts to qualify. For those who are debt-free and have a good income, the current market is manageable. However, for a single-income household, it is almost impossible to get approved for a mortgage without a co-signer.

Despite the increase in the Bank of Canada rate and the prime rate, the fixed rate has seen a slight decrease from 5.20% to 4.89%-4.94%. This stabilization in the fixed rate is one positive aspect of the current market. The Bank of Canada had no choice but to raise interest rates further to reduce inflation and try to have the economy grow faster. Although this may cause short-term pain for homebuyers, it will likely result in long-term gain for the economy.

Overall, the rise in interest rates is making it increasingly difficult for homebuyers to get into the market, especially for those with a single income and existing debts. However, the slight decrease in the fixed rate and the potential for a slight decrease in interest rates in the summer are positive signs for the market. The Bank of Canada's decision to raise interest rates is a necessary step to control inflation and encourage economic growth.