The housing market in Canada is experiencing some changes after the Bank of Canada’s recent interest rate cuts. This has sparked speculation across the market about how buyers and sellers will react. The housing market had been cooling from the pandemic-era frenzy due to rock-bottom interest rates. In many cases, buyers were waiting to see where home prices settled before making a move. However, experts suggest that some buyers may be missing out on better deals by waiting for their ideal mortgage rate in today’s slower market.
Data from the Canadian Real Estate Association showed that housing markets across the country have been slowing this spring. The question of how busy the rest of the year will be depends on how far and how fast the Bank of Canada’s easing cycle proceeds. Ipsos polling conducted for Global News revealed that many potential buyers are waiting for more easing before entering the market. However, Davelle Morrison, a real estate broker, believes that waiting for the perfect mortgage rate might mean missing opportunities in the current market. She advises buyers to consider both the mortgage rate they can qualify for and their purchase price, noting that locking in a lower price may be more critical in the long run.
When interest rates decrease further, Morrison predicts that more buyers will enter the market, leading to increased competition for available listings and potentially driving up home values. However, the ability to time the market assumes that prospective buyers can qualify for a mortgage. Qualifying for a mortgage involves assessing an individual’s credit history, down payment size, and income levels. While interest rate cuts may make variable-rate mortgages more attractive, many buyers may find that fixed-rate mortgages offer lower rates and are easier to qualify for.
Hanif Bayat, CEO of comparator site Wowa.ca, notes that fixed mortgage rates have eased slightly at the start of the Bank of Canada’s easing cycle. However, he cautions that movements in fixed rate mortgages are more gradual than the central bank’s cuts. Bayat is not convinced that the rate cuts will lead to a surge in demand and prices due to signs of weakness in the Canadian economy. Factors such as high unemployment rates and an oversupply of homes in some markets could limit the potential for price increases despite further rate cuts. Regional variations in the housing market may also impact price trends.
Experts suggest that prospective homebuyers should carefully consider their financial situation and long-term goals before rushing into a home purchase, driven by fear of missing out or declining interest rates. Clay Jarvis advises buyers to prioritize their financial realities over emotional impulses, such as feeling the need to own a home to feel like an adult. Jarvis warns against letting FOMO drive bidding situations that may not align with long-term financial goals. In light of the current economic uncertainties and job market conditions, it may be prudent for buyers to carefully assess their readiness to enter the housing market.
While some buyers may be eagerly awaiting further interest rate cuts to enter the housing market, experts caution that broader economic factors and regional market conditions may influence price trends. It is suggested that buyers take a step back and evaluate their financial readiness before making a decision. Prospective buyers are encouraged to weigh their long-term financial goals against short-term emotional impulses and consider how buying a home fits into their overall financial strategy. In a market where conditions may change quickly, taking a thoughtful and strategic approach to home buying may help buyers make decisions that align with their financial well-being.
