The Bank of Canada has yet again lowered its key policy rate this fall (by 0.5 points), reducing it from 4.25% to 3.75%, raising hope and questions for prospective buyers.
This fall in rates is indeed encouraging; however, they haven’t dropped down to where they were in the early 2000s and 2010s. Moreover, experts believe further decreased are on the way. With this in mind, should you wait a little longer to obtain a more advantageous rate or seize the moment now? The answer will depend on several different factors.
Understanding the Impact of Current Interest Rates
Despite the fact that interest rates have fallen slightly, they’re still higher than before, and directly impact homeowners’ monthly mortgage payments. So, what can mortgage holders expect to save with a 0.5-point decrease? About $30 a month per $100,000.
Declining rates do then mean that more people can enter the real estate market, but the overall situation remains volatile. At present, the Bank of Canada is exercising caution within an uncertain environment and may adjust rates further depending on inflation and economic trends.
Examining Your Personal Circumstances
If your financial situation is strong and you’re ready to buy now, delaying in hopes of securing a better rate somewhere down the line may prove risky. While you wait around, you could miss out on a house that ticks all your boxes. It’s quite the gamble!
Taking Inflation and the Housing Supply Into Account
Québec’s real estate market continues to stabilize; however, inflation persists as a major factor. It may be true that lower rates equal more affordable mortgage loans, this doesn’t mean that house prices will follow. Demand remains high in many sectors. Putting off a real estate purchase may lead to fiercer competition if rates drop significantly. Still, no one can predict the future!
Protecting Your Rate and Exploring Options
Experts do expect further rate cuts for 2025. But, of course, there’s always the unexpected! A good option if you’re looking to buy is to contact your financial institution right away to request a rate hold for a certain period (often up to three months). This allows you to reserve the current rate in the event of a future increase, and thus gain peace of mind. Should the rate fall again, you can, of course, decline the frozen rate and obtain a better offer.
The Risks of Wavering
Deferring in today’s market may mean facing unanticipated changes. If rates should eventually rise anew, potential buyers could end up with higher monthly payments. Furthermore, the uncertain global economic climate makes forecasting particularly tough, so waiting too long to reach a decision may prove costly.
Each Case Is Different
While interest rates do impact purchases, other factors similarly come into play, such as your savings, needs and long-term objectives. You must likewise consider the type of property you’re interested in. For example, if you want to acquire a condo located on Montréal’s North Shore or South Shore area for under $350,000, you’d better be ready to snatch one up as soon as it appears on the market. Such opportunities are increasing few and far between!
As you’ve seen, there is no single right answer when it comes to determining the perfect time to buy. The best thing to do is to meet with a broker to discuss possible scenarios and make an informed decision which corresponds to your reality.