Central Alberta’s low real estate prices are turning into a big advantage for homeowners, as well as buyers, as interest rates on mortgages climb.
While a national news story indicated this week that one in four homeowners are worried about having to sell their houses if mortgage rates rise any further, Larrissa Kalyn, chair of the Central Alberta Realtors Association, thinks this is more of a concern in larger markets, where the price of homes has rapidly escalated since 2020.
“I don’t see the same concerns here,” added Kalyn on Monday.
Red Deer-area home prices were left behind because of Alberta’s previously recessed economy, while house values soared to $1 million or more in Toronto, Vancouver and some other parts of the country during the pandemic.
But now that banks’ mortgage rates have increased to four and five per cent to counter rising inflation, this region’s more affordable house prices are proving to be a boon for homeowners, as well as buyers, says Kalyn. She noted, “Five per cent (interest) on a million-dollar home is much more worrisome than a five on $380,000.”
Many homeowners locked in their mortgage rate when it was at two per cent or below. But even if they didn’t, most banks will have pre-approved them for home purchase factoring in interest rates that are several percentage points higher than they were at the time, Kalyn explained.
“Even though rates were as low as 1.75 they were qualifying people up to 5 per cent… They add a couple of percentage points to ensure they can afford the house. There is a higher risk if they do it at lower rates.”
Central Alberta’s home sales have been strong since January.
Residential sales typically start to fall off as summer approaches, but Kalyn said she isn’t seeing this happening yet in her town of Rocky Mountain House. “It’s busy. People are still buying…”
She’s seeing some first-time home sales, but also acreages, recreational and rental properties being put up on the market.
Since mortgage rates are expected to go up again, she advises prospective buyers to get a pre-approved mortage now, since many banks will guarantee the rate for 90 days to six months.
Kalyn has heard another interest rate increase is coming later this year, with rates expected to stabilize by next spring.