Higher interest rates and inflation are impacting the housing market
The Bank of Canada (BoC) has raised its policy rate to combat inflation and the Bank is expected to hold rates high until 2025.
This means higher borrowing costs for Canadians looking to buy a home or renew their mortgage.
Fixed Rates Still Relatively High, But Expected to Drop
Five-year fixed rates are much higher than pandemic lows but are forecast to remain stable or fall slightly by the end of 2025.
Variable Rates High and Uncertain
Variable rates are currently higher than fixed rates and may remain above 6% for most of 2024. Economists are revising forecasts upwards due to economic uncertainty.
Locking In May Be Prudent
Variable rates are over 1 per cent higher than fixed rates
Variable rates are expected to begin falling in 2024 but likely will not drop dramatically until 2025.
Locking into a 3-year fixed rate now may be wise to take advantage of the lower rate in the near term for those prioritising stability.
Fixed Rates Come with Penalties
If you might need to move in the next three to five years, you might want to avoid a fixed-rate mortgage.
Breaking a fixed-rate mortgage before the term ends can result in significant penalties. Consider your plans to move or sell before choosing a fixed rate.
Pre-Approval Can Help Mitigate Rate Increases
Getting pre-approved for a mortgage secures a rate for up to four months, giving you an advantage if rates rise while searching for a home.
Seek Professional Advice
A mortgage broker can help navigate the current market and find the best rates and terms for your situation.
Housing Market Cooling Expected
The combination of rising interest rates and high prices is expected to cool the housing market, potentially leading to price declines in the short term.
Homebuyers Should Be Prepared
If you plan to buy within three years, be aware of the possibility of falling prices and the potential challenges of securing financing in that scenario.
Sellers May Want to Act Sooner Rather Than Later
While the market is still favourable compared to pre-pandemic times, it's showing signs of cooling. Selling now could secure a good price before a potential downturn.
Uncertainty Remains
The future of interest rates and the housing market is uncertain. Consulting a professional and carefully considering your individual circumstances is crucial for making informed decisions.
