A lot of people sat back during the pandemic, hoping the house prices will decrease but have since accepted that is not so likely to happen. Most people are afraid to get into the home buying experience and say if interest rates go up, they will not be able to purchase a home. That’s why currently, there are a lot of people trying to take advantage of the pre-approvals and not miss out on low rates.
The Canadian Real Estate Association said the national average home price has gone up 13.9 percent. In Toronto, it’s even worse. Homebuyers there pay 20 percent more than they did last year. Rate hikes will make this percentage even higher.
It’s obvious that sellers are currently at an advantage since homebuyers barely have the opportunity to put in any conditions for a purchase or an offer. Why? It’s not just the pandemic – it’s a simple supply and demand case. Add up the low-interest rates, immigration, and inflation and you get the perfect storm the homebuyers are currently in.
At this moment, the country’s top five banks’ rates are between 2.62 percent and 2.94 percent for five-year fixed mortgages, while for the variable ones that number decreases to 1.40 and 1.75 percent. The interest rates have sat at 0.25 percent since March 2020, but as the Bank of Canada has hinted and other economic experts predicted – it could rise as the country loosens the COVID-19 restrictions.
Homes aren’t getting cheaper and the people know it. Many housing markets are making it too hard to keep purchase prices down – this being the reason why more and more people are doing their best in finding ways to hold to current rates. One of the ways is getting mortgage pre-approvals and rate holds before interest rates become higher.
Considering how mortgage rates are slowly getting higher, there is a big chance the Bank of Canada will increase the interest rate by more than people expect it, according to BMO Capital Markets senior economist Robert Kavcic who suggested that those with contracts in hand have a bit more time to buy something than those without.
It comes as no surprise that in a recent survey, more than one-third of Canadians between the ages 18 and 40 said that they no longer believe they will ever be able to own a home. The Canada Mortgage and Housing Corporation said that this housing markets situation won’t wear off for another two years, meaning that even then, the prices won’t come down, they just won’t rise as fast.
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Kelly Wilson
Kelly Wilson, a top national mortgage producer, has dedicated 19 years to customizing financial solutions for clients across Canada. Her strategic approach has facilitated over $1 billion in mortgage funding. Starting her real estate investment journey at 21, she now holds $11 million in assets. Kelly's mission is empowering clients to achieve financial freedom and sustainable wealth.
