In September, the Bank of Canada opted to maintain its policy rate at 5%. The recent rate hikes over the spring and summer had already begun influencing the housing market. Let’s take a closer look at the current scenario, what’s on the horizon, and how to navigate property purchases.
Current Market Conditions: The recent rate hikes during the spring and summer caused a slowdown in the housing market. Some potential buyers chose to wait on property purchases, hoping for more favorable conditions. Though home prices decreased by 6% in some markets during the summer, increased interest rates affected the amount borrowers could qualify for in some cases. In the meantime, property owners have been busy navigating renewals and refinances, exploring switching lenders as they weigh out how to optimize their financial situations.
The Bank of Canada’s Upcoming Announcement: The overnight rate directly impacts various financial products, including lines of credit and variable rate mortgages. With the Bank of Canada maintaining its 5% policy rate, many are hopeful this might be the peak in the overnight and prime rate. We’ll have a clearer picture after the upcoming announcement on October 25th. Borrowers are of course eager for a possible decrease in rates and a bit more potential breathing room.
Looking Ahead: As we look ahead to the coming year, analysts are forecasting a stronger housing market as the Bank of Canada begins to signal interest rate reductions. Some economists anticipate these to begin by mid-2024. This is expected to lead to an increase in new listings, addressing the shortage of inventory. With lower interest rates, more buyers will likely enter the market, boosting demand. Until then, buyers may have greater opportunities to negotiate property values and other contract terms.
Making the Right Move: Sometimes life dictates the timing of your real estate decisions. Families grow and evolve, and others relocate for work; these are two examples of why property purchase decisions are made without regard for market conditions. Most purchasers will buy when the opportunity presents itself. Historically speaking, time has taken care of dips in the market as values have generally continued to increase over time. Because property values tend to increase, the best time to buy can sometimes be when you qualify. If you wait, property values, interest rates, and lender policies can change, and you may not be able to purchase for quite as much as you did when you first began your search. Some buyers wait until they’re in a better financial position. With an upcoming raise that might be the best play. But the best time to get in the market might just be when your pre-qualification terms match your plans vs. waiting for rates or values to move.
Your Next Steps: Whenever the time is right for you, consider a no-obligation pre-qualification terms review and a rate hold for 90-120 days while you explore the market. Rate holds protect your ability to qualify, ensuring your cash flow and interest savings if rates rise while you shop. Understanding your pre-qualification terms will help you create a realistic budget for your property purchase. Additionally, it puts you in a stronger negotiating position. Sellers often prioritize offers from those whose financing has been reviewed in advance.
Conclusion: Regardless of where you are in your real estate journey, don’t hesitate to reach out if you have mortgage questions at any point. I’m always happy to help.
Adapted from DLC Marketing
Image Credit: Autumn Mott Rodeheaver on Unsplash