We know rates are heading up. So now what?
After the Bank of Canada’s unprecedented rate hike last week, Canadian homeowners and real estate professionals have been left reeling. So what’s to come in the housing market, and how can you best set yourself up for success in weathering any potential storm?
Right after the Bank of Canada threw us a curveball by increasing its overnight rate up to 2.5% on July 13th, economists and real estate professionals across the country flocked to their keyboards. All week we’ve been bombarded with headlines about where the market is headed, and most of them aren’t super fun. A senior BMO economist called the hike “a hammer to the housing market,” RBC released predictions of steep and widespread price cooling, and the National Post reported $200k discounts and record delistings in major markets. While of course we know that all of this is just a correction to a market that became synthetically inflated over the past several years, it’s understandable that Canadians are left wondering what the best course of action is. But I have good news! Not only will this correction being forecasted be temporary, but there are upsides!
More choice.
As prices drop and rates go up, buyers are stepping back from the market to wait and see. This means that for those stay in the game, the selection of available properties in your price range is growing.
Safer offers.
More options with less competition will give buyers the opportunity to shop around and make prudent, competitive offers rather than throwing all of their eggs in a single condition-free basket as has been the case until recently. As sellers feel the pressure of leaving their listings on the market longer, there may even be opportunities for savings you couldn’t have imagined this time last year.
When rates go up, inflation goes down.
I understand that seeing the Bank of Canada rate hike was daunting, but keep in mind that it is part of a plan to help cool inflation. With the current price of oil, BoC governor Tiff Macklem expects that things could get a bit worse before they get better. But if the rate increase does its job, consumer activity should start to slow toward the end of the summer, bringing the rate of inflation down with it.
On top of the positives, there are several things you can do to not just prepare yourself for what’s to come, but even take advantage of the new, chilled climate.
Hold onto your rates.
If any part of you is considering purchasing in the coming months, now is the time to start your pre-approval process. Rates are still relatively low but are expected to continue their climb. But if we complete your application and pre-approve you now we can hold your rate for up to 120 days with most lenders, ensuring that you have time to shop without letting a great rate slip through your fingers.
Access your equity now.
We say it all the time, but this climate necessitates that we say it again - now is a great time to pull the wealth that you’ve built in your home out. Whether it’s through a refinance or opening a Home Equity Line of Credit, accessing equity before the forecasted drop in prices hits its lowest valley is a great financial decision. You can choose to invest that cash, or just tuck it away for a rainy day. But getting your hands on it while it is still there is paramount!
Reset your payment.
Are you watching rates go up and feeling apprehension about what your payment might look like come renewal time? Then we should be reviewing your mortgage and looking at how we can set your monthly payment where you need it to be now. We can look at options like extending your amortization, refinancing to lock in a lower rate now, using prepayment privileges to start incrementally increasing your payments today or even switching to a variable rate (which we learned last week are historically expected to save you money over time).
So, I get it. The real estate work is an overwhelming place right now! But our team is here to help guide you through the murky waters, answer all of your most pressing questions and ensure that you come out the other side of this correction as strong as ever!
