September 8th, 2022 | Real Estate Advice

Rising Interest Rates in Ottawa – What You Need to Know

It’s been all over the news these days, so you’re probably at least somewhat familiar with the recent Policy Rate hikes by the Bank of Canada (BoC). But what exactly does it mean and why does it matter to you?

Like with most things, the media can sometimes sensationalize the truth. The reality is that these recent interest rate increases were always planned and, in some cases, are better for Canadians. 

Here is everything you need to know about rising interest rate hikes in Ottawa. 

What is the Policy Rate? 

The BoC is Canada’s central bank, kind of like the Federal Reserve in the US. While the Bank of Canada doesn’t officially set mortgage rates in Canada, they do set what is known as the “Policy Rate.” Sometimes this is also called the “Overnight Lending Rate” or the “Benchmark Rate.” For our purposes, let’s say Policy Rate. 

The Policy Rate is the interest rate that banks use to borrow money from each other. So effectively, the Policy Rate directly impacts the Prime Rate, which your loans or lines of credits are based on. 

The Prime Rate also dictates the rate of interest on variable rate mortgages. So as the Prime Rate fluctuates, so do variable mortgages rates.

You can learn more about variable rate and fixed rate mortgages in our blog post right here.

First, We Have to Understand a Bit of the Historical Data

Back at the start of the pandemic, the Bank of Canada made the decision to reduce their Policy Rate to 0.25% to protect the Canadian economy in a time of uncertainty and allow Canadians more borrowing power to get them through a period of crisis. 

It was the right thing to do. 

As the Canadian economy began to recover from the pandemic, there were signals that a rate increase back to the “neutral” level would be coming. However, new COVID-19 variants and other economic factors such as the war in Ukraine, extended the period of uncertainty and resulted in the BoC holding its record-low interest rate. 

Flash forward to January 2022, the Policy Rate is still at a record low. However, as a result, the economy has begun to overheat. Low rates have created a hyper-competitive Seller’s Market in the housing industry, and inflation has begun to hit record levels for consumer goods. 

These factors put pressure on the BoC to begin the process of raising rates back to the pre-pandemic normal. 

Throughout the spring, we saw a few small increases. The first was 0.25% followed by a 0.50% increase in April. However, the big news came in the summer, when the central bank hiked its policy rate by its largest jump since 1998: 1.0%. This followed by another 0.75% increase on September 7, 2022. 

This is where we are today, and why everyone seems to be talking about interest rates. 

What Do Interest Rate Increases Mean for Homebuyers? 

Higher interest rate increases have definite pros and cons for homebuyers in Ottawa. However, in our opinion, they are actually beneficial. 

Here’s a look at what homebuyers can expect with higher interest rates:


  • The housing market will cool down slightly. 
  • Housing prices will soften slightly, and some homes will sell either at market value or below the asking price, making things more affordable for buyers. 
  • The softening market will also result in less competition, which means fewer bidding wars and more time to truly consider your purchase. 
  • Homes will be sold with conditions, which means buyers will have the opportunity to request inspections and negotiate. 
  • Closing days will get longer. In a typical Balanced Market, we would see closing dates of 60-90 days, rather than the fast closings we saw during the pandemic. 
  • Fixed-rate mortgages are not impacted by the recent increase in rates, since their rates are dictated by bond yields, which are actually down right now! 


  • Rising interest rates will result in higher mortgage rates for variable mortgages. 
  • Buyer borrowing power will be reduced since you will need to get approved at a higher rate, and you likely won’t be able to borrow as much.
  • If you are not quite ready to enter the real estate market, you may find more pressure in the rental market. When interest rates go up, rentals also follow close behind. 
  • This period of softness is expected to be short-lived as inventory issues still persist in Canada. Many economists are expecting a return to a Seller’s Market, although not as aggressive as we saw in the past two years.

Thinking about buying a home in Ottawa this year? Here are a few blog posts to help you get started:

How Are Sellers Impacted by the Rising Interest Rates 

Sellers, on the other hand, will need to adjust their expectations slightly moving into this more Balanced Market. However, it’s not all bad news. Most sellers will eventually also become buyers, so they will get to reap the benefits of a slower market when they begin their purchasing process. 

Here are a few considerations for sellers: 

  • Your home will likely stay on the market longer.
  • Your pricing strategy may change and you may expect lower offers with more conditions. 
  • Preparation, staging, and marketing will play an even larger role in your home sale. 
  • Prepare to negotiate and receive conditional offers. 

With all this said, the best time to sell your home is whenever you are ready. There is no surefire way to tell when the market has reached the bottom or the peak. 

Should You Buy or Sell First in Ottawa Right Now? 

You’ve probably seen the recent CBC article that went viral a few weeks ago about the couple who felt they missed out on getting the most profit for their home. Were you able to point out the mistake they made? 

In a Balanced or Buyer’s Market, it’s a good idea to sell your current home before buying your new home. 

The reason? Each passing week, the market is falling a little bit more. Let’s say home values are dropping by about 3% per month. If you sell first, you are going to get the most profit for your home, and then be able to reap the benefits of lower prices when it comes to your turn to buy. 

It’s also easier to buy property in a Balanced or Buyer’s Market, as the name suggests. With lower prices, less competition, and more negotiating power, buyers are more likely to find a home quickly and succeed with their purchase. 

One More Thing to Remember

A lot of the news coming out these days about the real estate market is strictly focused on Toronto. It’s important to remember that Ottawa is slightly sheltered from some of the more aggressive hits to the economy.

Our economy and the housing market is very stable, and what happens in Toronto isn’t necessarily going to happen here. 

Learn more about the Ottawa housing market and our unique neighbourhoods in these posts:

Although many of the articles coming out are acting like the market is crashing, that is not the case at all. The Bank of Canada is simply raising interest rates back to pre-pandemic levels, which were already historically low at the time. 

If you’re confused or curious about what these new changes mean to you as a homebuyer or seller, don’t hesitate to reach out to our team, we’re always happy to help you navigate the market. Contact us today here to learn more.