What Continued Strong Housing Starts Means for Construction Financing

If there’s any indication that we’re entering a new chapter, it’s this. After cutting interest rates early on in the pandemic, the Bank of Canada has implemented another rate hike aimed at stemming inflation – and it’s a big one. 

The sharpest single increase in over 20 years, the benchmark interest rate is now 3.25%. 

How it impacts you and your clients

Just two months ago, we told you about how recent rate hikes were impacting real estate across the country and the demand it would drive for more flexible lending options. 

With this additional increase comes an even greater need for flex financing, as several of Canada’s biggest banks also adjust their benchmark rates in response. 

Traditional lenders are becoming more conservative and your clients may be shopping for better options to help them get their projects off the ground.

The demand is still there

Rate hikes won’t solve the housing shortage that continues to be an issue across the country. Despite the further cooling of home sales spurred by this most recent rate hike, new housing starts and the demand for construction financing and flexible mortgages is steady.

This means that your clients are still busy, working to secure financing for new home construction across Ontario. 

What is flexible construction financing?

The big five Canadian banks offer construction financing, but with major caveats and restrictions like unbending rules around withdrawing funds, making it difficult for builders to plan for pivots during their project. 

For this reason, they’re looking for more agile lending solutions like those offered by an alternative lender. 

How to communicate the benefits to your clients

1. Do the math: Show them that you understand market trends and the impact to their business by calculating the potential additional costs if they choose traditional lenders over flexible financing.  
2. Emphasize the urgency: Strong housing starts means that builder demand is high. Don’t miss your opportunity to connect with them now to stress the importance of making the right financing decision to get their projects underway.
3. Check out our resources: We have many construction-related resources available to help your clients understand what needs to be tracked to ensure construction project success.

The mortgage and house market’s response to interest rate increases is immediate, and your clients may be exploring financing to meet their evolving needs.

Being aware of the ever-changing market and lending options available will help you support your clients in their search for solutions to finance their upcoming construction projects.

Help them get started with our Construction Progress Template and Construction Cost Template. Plus, find additional helpful resources here.