As you all know and have heard, the Bank of Canada has increased their overnight lending rate by 50 basis points and the rate now sits at 1.5%. This increase has been expected and doesn’t come as much of a surprise to many.
Of course, those with variable-rate mortgages will be the most affected as well as those who often use their credit lines or HELOCs but there are a few things that we should keep in mind.
First, always spend within your means. If you are approved for a mortgage at a certain number, look at your monthly payments first and see if that would fit into your monthly budget.
Second, these interest rate hikes essentially bring back our interest rates to “normal” levels. Back in 2019, before Covid, the Bank of Canada’s overnight rate was at 1.75% and when covid struck and many people either lost their jobs or were laid off, the government decided to lower interest rates. The Bank of Canada’s rate went as low as .25%, that’s right, a quarter percent. This brought on extremely low-interest rates and in turn, drove up home prices by the week for about 2 years. Things couldn’t continue the way they were going and it was inevitable that interest rates would rise again.
So what we are seeing now seems to be a “normalization” , of rates, of home values and more. If you’re a buyer looking at possibly purchasing a home and living in that home long term, we haven’t seen a better time to buy a home in many many years.
Buyer have more options as there are more homes staying on the market, there is a possibility that you may have a seller accept a conditional offer, something that was almost unheard of over the last couple of years.
If you think about waiting until prices drop more, 2 things will likely happen, either the interest rates will continue to rise and home value drops at which point you will end up paying more on your mortgage payments anyways. Or you will most likely miss this boat.
We often work with many different types of Buyers, some investors, flippers, but mostly families. If you are looking for a Home and do not plan on selling it in the very near future, chances are that Real estate will bounce back and continue to rise in the long term. Toronto is a world class city that continues to attract hundreds of thousands of people every year, the demand for housing will continue to grow.