You’ve probably heard me say this before: it’s never a good idea to time the market. But there are moments in time where if you’re looking, it might be better to act sooner than later. These times are rare, but when they do come around, they present a unique opportunity if you play your cards right. This is one of those times.
The Rate Environment
On the surface, it might not seem like a great time to buy a home. The Bank of Canada just raised their overnight rate a few weeks ago, and another rate hike is likely on the way at the next BoC meeting on July 12th.
Fear and uncertainty around inflation has caused variable rates to skyrocket, and fixed rates are quickly following suit. In fact, fixed rates have gone up almost 100 basis points in the last few weeks. Potential buyers who aren’t in a financial position to handle the high monthly payments are getting edged out. But those who are might find themselves in a good position to pounce.
The Opportunity
If you have a rate hold in place, or even if you don’t – you might be in luck. A smaller pool of buyers could mean more inventory to choose from. Even better, home prices could take a small dip as they often do in the summer months. It might not be a huge discount, but it could help offset higher borrowing costs. We’re likely heading into a buyer’s market if we aren’t there already.
What Is Happening With Rates
Of course, nobody wants to deal with higher rates, even if they do open up doors in the housing market. Any expert will tell you that these rate hikes are completely unnecessary. Unfortunately, the damage is already done.
Interest rates are well above 4%. Canadians are struggling to make ends meet. Consumer loans, credit cards, and mortgages are increasing. Household debt is getting out of control, and it’s due in part to the stand off between BoC Governor Tiff Macklem and Justin Trudeau.
While Macklem raises rates in an effort to cool inflation, Trudeau keeps flooding free money into the hands of Canadians. Consumer spending isn’t slowing down as quickly as it should, and it’s all because of reckless federal spending and gratuitous social programs. I’ve never seen anything like it in my entire 33 year career.
The Good News
The faster rates go up, the faster they’ll come down. The reaction to the June 7 rate hike was fast. Supply flooded the market, and home listings shot up by 15-20% across Canada. Another rate hike will surely have a similar effect. All you have to do is keep your eyes open. If you do find something, make sure you’re not locking into anything longer than 2-3 years. As always, I’m available to chat.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca
