In Ontario’s dynamic real estate scene, many homebuyers are pausing before they take the plunge on a new home. People are weighing their options, unsure of what decisions to make regarding interest rates and property prices.

Should you buy now, or wait for a possible decrease in interest rates?

The appeal of lower borrowing costs is hard to ignore. Potentially lower rates can promise significant savings over the lifespan of a mortgage. However, this strategy raises a critical question: are the unknowns of waiting worth the risk of rising home prices?

How Changing Rates Could Affect Your Buying Decision

Interest rates significantly influence two key aspects of buying a home: your ability to qualify for a mortgage, and the affordability of your monthly payments.

Under current Canadian regulations, mortgage qualification is determined using a stress test. This requires buyers to qualify at 2% higher than the actual rate to ensure borrowers can withstand future rate increases. Some people wait for both interest rates and property prices to fall, but this approach carries inherent risks. The demand for homes could actually increase as interest rates drop, making the market more competitive.

This dilemma is particularly relevant in Ontario. Different cities in the province show diverse market behaviours. For instance, Toronto’s real estate is robust— high prices endure through fluctuating interest rates. In contrast, more affordable markets like Guelph, KW/Cambridge, and Fergus are influenced by broader, different economic factors.

The crucial decision is whether to buy now at a possibly higher rate, or to delay in hopes of a rate decrease. But, low supply and high demand are common. In markets like Ontario’s, significant price drops are unlikely, even if a market adjustment occurs. So waiting might not actually improve affordability, as one might hope.

What to Consider About Interest Rates Before Buying a Home

For those ready to take the plunge to a new home, consider the following:

  • Purchasing sooner could be advantageous if you’re financially stable and meet mortgage qualifications. For example, a property valued at $700,000 today could appreciate in value. Waiting would then be a more expensive option, as market prices can rise more significantly than interest rate reductions.
  • Choosing variable rate mortgages can offer you flexibility. They allow borrowers to switch to a fixed rate during the term, potentially capitalizing on future rate reductions.
  • Remember that banks prioritize their shareholders, not their clients. Working with a mortgage broker can provide you with access to a broader range of lending options, and help you secure more competitive rates.

Waiting for lower rates might seem like a clear decision. But, ultimately, the potential increase in property prices could offset the benefits of lower interest rates. As a principal broker at The Mortgage Centre, I suggest you consider both the current market conditions and your financial readiness before deciding.

Need Advice on Navigating Changing Interest Rates?

For personalized advice, or to further discuss your mortgage options, please reach out to me. Making an informed decision now could be your first step towards securing your future home.