Rate Pauses May Force Landlords in Canada to Sell or Raise Rents

The Bank of Canada is pausing rates—and it could compel landlords to start selling off their investment properties. 

The alternative is raising rents to offset the significant increase in their monthly mortgage payments; many landlords in Canada were on variable rates and have gone from a steady cash flow or breaking even to losing around $1,500 a month. 

This is the second rate hold from the Bank of Canada and is likely to push some of these landlords out of the rental market—or at least force them to unload some of their properties, leaving their tenants vulnerable. 

Here’s a breakdown from BAM Creator Tom Storey:

Consequences for landlords

In an April 19th interview, Davelle Morrison, a broker at Bosley Real Estate, told BNN Bloomberg, “For every month we have a rate pause, there will be landlords who will struggle to hold onto their rental properties.” 

She further commented that landlords who are currently operating at a loss will probably be forced to sell their rental properties or start charging more just to get out of the red and break even with the higher costs that have come with interest rate hikes. 

Another Canadian broker, Daniel Foch of RARE Real Estate, reported a 300% annual increase in the number of landlords driven by financial stress to sell their properties in Toronto. For many, the interest rate freeze has locked them into higher monthly costs for a prolonged period of time. 

Consequences for renters

Those rent increases won’t happen in a vacuum, either. As more landlords decide to raise their rents to hold onto their investments, their decision will have a trickle-down effect on the overall rental market, which is already squeezing renters. 

Whether landlords raise rents or sell off their properties, renters are at their mercy. As more rental properties are sold, rents are likely to increase all the more. And the pressure from those rising rental costs could drive some renters to enter the buyer market. 

According to another CTV article, “As the Bank of Canada pauses rate hikes, mortgage rates in Canada creep downward,” which could get more home buyers off the sidelines. 

Top takeaways for real estate agents

Whichever community you serve as a real estate professional, if your goal is to be the best resource for home buyers and sellers in your area, you need to know exactly what’s going on in your local market—and to be hyper-aware of any changes that affect the people you serve.

You also need to be able to articulate what’s happening in clear, accessible language. 

In Canada, as in the U.S., buyers and renters need knowledgeable guides to help them see the advantages and the risks of buying a home right now. Then, when the time is right, they can join the ranks of wealth-building homeowners with their eyes wide open.