Her lot's not even graded — let alone prepared for foundation — and Domenica Daley's dream home has already gotten much more expensive.
She closed the deal for a parcel in Paradise in June, and quickly got to work clearing out trees and rocks. But in the few months since her first offer, mortgage rates have climbed, and Daley is facing a much bigger bill.
"It's looking like the two and a quarter [percentage points] that it's gone up over the last couple of months is going to be about $250 to $300, depending on the type of mortgage we choose," Daley said. "Every month … for a generation."
Rising interest rates are reshaping the real estate market in Newfoundland and Labrador, and aspiring homeowners are scaling down their expectations on what they can afford — even mid-project.
Daley has secured a builder's mortgage, which helps finance the construction of a home. She said her rate is not yet locked in — it won't be until the first of several draws from the mortgage — so movements in interest rates are making a big difference.
"I'm constantly checking and listening to the news and and trying to anticipate what that's going to look like for us and how it might change what life in the house is actually going to be like," she said.
"We don't know what it's going to look like at the end, which is nerve-racking."
She says she's budgeted well, and not to the top of what she can afford, so the rise in interest rates won't force dramatic changes to her lifestyle. But extras, like crown mouldings, are now off the table for a few years — especially because the cost of so many things, not just housing, is going up.
"I like to have that wiggle room because, you know, I mean, inflation and and the cost of groceries and gas and everything has gotten so expensive." she said. "So, unfortunately, you know, that means that our disposable income is maybe going to be a little bit less."
On Wednesday, Statistics Canada reported that Canada's annual inflation rate hit 8.1 per cent in June — a 39-year high.
Leslie Penney, co-owner of East Coast Mortgage Brokers in St. John's, said many prospective buyers are shrinking their expectations after the Bank of Canada raised interest rates a full point last week to try to tackle inflation.
"Sometimes it's a reality check," he said. "It's probably bad news in the moment, but it's worse news if someone ends up into a home they can't afford."
At an interest rate of 5.5 per cent, a $1,500 monthly payment can support a 25-year mortgage of $245,000. Compare that with rates that were more common last year: at a rate of 3.5 per cent, that same payment was able to support a 25-year mortgage of $300,000.
Penney says most people enter his office with a housing price, not a mortgage payment, in mind. And when they see just how expensive that payment is, some even decide to leave the market.
"Some people are thinking that they'll hold off for a bit, just based on the increase in payments and now that's past their comfort zone," he said.
According to Penney, the biggest issue in the housing market now is inventory, with new listings moving very quickly. While increases to mortgage rates will slow the market somewhat, the broker said, the market is still very active, and he's not expecting a substantial decrease in sales in the near future.
Daley's not planning to walk away; even if she'd known of the impending hikes, she said, she'd probably still make the same decisions today. But her advice for others in the market is to go mid-range.
"My husband … he'll just sort of make fun because I'm always so cautious," she said. "I overestimate everything. But in incidents like this, it really served us well."