Canadians — especially homeowners with variable mortgages — are paying close attention to Bank of Canada interest rate announcements this year. With talk of dipping rates, the housing market is already warming and is primed to heat up even more if the rates do decline.
While it’s possible that home prices are currently lower compared to the past year or two, there’s also the chance they could climb back up. This brings up an important question: should you seize the opportunity to buy now while prices are down, or hold off until interest rates drop further? Let’s take a look.
How the housing market is affected by interest rates
Simply put, when interest rates are lower (as they were in 2020 when they hit a historic low), it tends to spark a surge in people seeking mortgages and buying homes. This drives up demand and leads to a seller’s market — with high home prices. Additionally, homeowners might choose to capitalize on this heightened demand by selling their properties at top dollar. However, when interest rates rise, as they have been over the past couple of years, the market tends to cool off. This happens because demand decreases and sellers often wait for more favourable conditions before putting their homes on the market.
Interest rate predictions
In its latest announcement in March, the Bank of Canada held interest rates as predicted. Initially, experts had been predicting rates cuts by June, though it all depends on inflation. While experts are still predicting interest rate cuts in 2024, the timing isn’t clear anymore. The next bank announcement is scheduled for April 10.
So, which is a better plan?
Ultimately, the decision hinges on your financial goals. If you find yourself with less cash upfront for a down payment, it might be wise to consider buying when home prices are lower. This way, your down payment amount will be smaller. However, if you’re aiming to secure lower mortgage payments in the long term and you have the means for the larger down payment, you may want to wait to buy until interest rates drop.
Want to talk to an experienced, trusted agent about your options? Contact our team today, we’re ready to help!
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