Interest rates are one of the most powerful forces shaping the real estate market. They determine how much home you can afford, which drives demand, which impacts prices. Let me explain how rates are currently influencing Greater Victoria's market and what changes could mean.
The Rate Environment: Coming Down From Peaks
A year ago, mortgage rates hit 6–6.5%, the highest they'd been in decades. That severely compressed buyer purchasing power. Today, rates have moderated to approximately 4–4.5% on five-year fixed mortgages, with some lenders offering even lower. This shift is significant because it directly translates to affordability. At 6%, a $1M mortgage costs roughly $5,990/month. At 4.5%, the same mortgage costs $5,070/month—a difference of $920 monthly, or $11,000 annually. That's meaningful.
Rates and Purchasing Power: The Math
Lower rates expand purchasing power. With rates at 6% and a $7,000/month budget for mortgage payments, you can afford a $1.17M home. With rates at 4.5%, that same $7,000 buys you a $1.55M home. Conversely, if you're set on buying a specific $1M home, the lower rate means your monthly payment drops significantly, improving affordability. This explains why the market felt tight during the high-rate period—buyers couldn't afford as much. As rates come down, the same buyers can suddenly afford more, or afford the same home more comfortably.
Rates Driving Demand and Market Pressure
Falling rates encourage buyers off the sidelines. People who were priced out at 6% rates start qualifying for mortgages at 4.5%. This increases buyer demand, which puts upward pressure on prices. We haven't seen explosive demand yet in Victoria because rates only recently started falling, but if rates stabilize in the 4–4.5% range, expect increased buyer activity throughout 2026, particularly in spring and early summer. This would support prices and potentially create modest appreciation.
Rate Locks and Timing Decisions
If you're a buyer considering a purchase in the next few months, locking in current 4–4.5% rates is advisable. The current rate environment is favorable compared to the recent past. I'd rather see buyers secure favorable rates now than gamble rates will drop another 0.5% and then watch rates spike unexpectedly. In finance, a 4.5% rate you have beats a 3.5% rate you hope for.
Variable vs. Fixed Rate Considerations
Some lenders offer variable rate mortgages at lower initial rates (currently around 4%). Variable rates fluctuate with prime rate changes. Fixed rates (4.5%) are higher now but guaranteed stable for the term. In an environment of potential rate volatility, many buyers choose the certainty of fixed rates, accepting a slightly higher rate for predictability. This is a personal risk tolerance decision, but fixed rates are generally preferred in uncertain rate environments.
Implications for Sellers
For sellers, falling rates are a tailwind. They expand the buyer pool because more people can now qualify for mortgages. This supports prices and demand. However, rising inventory still constrains seller leverage. If you're considering selling, falling rates combined with spring seasonality make 2026 a favorable window. The time to list is while rates are favorable and before the summer heat passes.
The Bottom Line on Rates
Interest rates are the single largest factor affecting housing affordability and demand. Current rates at 4–4.5% are favorable compared to the recent high. If you're a buyer, secure these rates while available. If you're a seller, capitalize on the expanded buyer pool and spring seasonality. Make your real estate decision based on your personal situation, not rate speculation.
I'm Dan Juricic, a REALTOR® with RE/MAX Camosun. If you have questions about the Victoria market, I'd love to help. Call or text me at [phone] or visit danjuricic.com.