This text is part of the special Personal Finance section
As mortgage interest rates have exploded since 2022, many aspiring homeowners are wondering if they should postpone their purchase. Is it better to wait or start looking for a property now? Overview of the current market.
Transactions are always done to the advantage of the sellers, believes Véronique Caron, mortgage broker and team manager at Multi-Prêts. This is particularly due to the low inventory available, she said.
This is also what Unsal Ozdilek, full professor in the Department of Strategy, Social and Environmental Responsibility at the University of Quebec in Montreal (UQAM), notes. “It’s still selling at high prices, and prices continue to increase,” notes the man who trains experts in property evaluation and management.
But the very precipitous increase in interest rates by the Bank of Canada since March 2022 has led to a “significant slowdown”, observes Marc Lefrançois, real estate broker at Royal Lepage. “Prices have increased too quickly during the pandemic. And immediately after that, interest rates became much higher. The marriage of these two factors completely stopped the market,” he believes. He also believes that properties listed for more than a million dollars are “very difficult to sell at the moment”.
Qualify for a lower price
Despite the slowdown in real estate transactions, mortgage lending activity continues. Mme Caron estimates that around 40% of mortgage holders in Canada will have to renew their loans by the end of next year. The broker observes two types of clientele in her offices. Some stayed informed about the upward trend in interest rates and chose to consult their broker in advance. “We were able to remodel their mortgage before it was renewed. They are less alarmed at the moment,” she believes.
Other homeowners, who often deal with a traditional bank, are startled when they see the amount of their future payments. “If they have accumulated debt, we will look at the possibilities of integrating them into a mortgage loan with a lower rate than that of a card or a line of credit,” explains the mortgage broker.
Don’t wait before buying
But, even if interest rates are higher currently, experts agree that it is better not to wait for the Bank of Canada to lower them before purchasing a property.
“Don’t wait for the moment when the market will recover,” advises Mr. Lefrançois. If you want to buy, it’s now. Yes, interest rates are high, but you have options and are able to negotiate. »
Mr. Ozdilek agrees. “Even if rates fall, there will still be a shortage of housing,” he believes.
As for Mme Caron, she believes it’s an opportunity if the client can qualify for a mortgage and find a property that suits them. “I have no guarantee of what it will be in a year or two years. Currently, we have to deal with this inflation. Are there going to be more restrictive measures? Are property values likely to surge again? » she asks herself.
Tools like CELIAPP are added to those already existing for first-time buyers. Will this make the RRSP Home Buyers’ Plan (RAP) obsolete? Experts believe not. “We combine both the RAP and the CELIAPP with our clients to build a down payment,” explains the real estate broker.
A market recovery in 2024
Véronique Caron expects possible rate cuts next year. But should you choose a fixed or variable rate for your mortgage? “The answer to this is rather to opt for the right financial institution. More than ever, the choice of bank is important,” she believes. She therefore recommends paying attention to the different conditions and terms in the event of a penalty, as well as at the end of the loan. “Given that we have pretty much reached the peak of rate increases, we are also starting to make variable rate loans again,” she observes.
If the market will remain approximately the same over the coming months, Mr. Lefrançois believes that an improvement is possible in 2024. “If the Bank of Canada gives a clear signal that inflation is decreasing, we will see it resume quite quickly” , he says.
This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.