The Bank of Canada has increased rates again to 2.5%. This is the highest level since 1998 and it is a sign that the inflation is being tackled at the cost of home equity but giving new buyers a chance to compete with lower down payments. Now, we’ve heard what everyone is saying on social media – it’s just going to cost more to carry the home! Yes, your carrying cost on a home priced significantly lower may be equal to or higher than one that was more expensive 6 months ago, however, this also means that those down payments that were taking so long to save up can now be used, beyond that, the gamble of taking either a variable or fixed rate is on the borrower. When you calculate the present value of money (in this economy), along with home prices decreasing, the value of a down payment sitting in an account is also going down.
Even though rates will increase (most likely) by the end of the year, the renewed real estate cycle is statistically bound to go up. The same principle does not (unfortunately) apply to your down payment if it’s sitting dormant.
The current payment increase in a mortgage for a condo around 700k is going to be around $350 a month versus what the payment would have been in January of this year. A $4’000 payment increase a year now will be pay over the life cycle of your home as it grows year-over-year.
Is it our job to tell you real estate is a good buy, kind of, but this isn’t us saying real estate is a good buy just because we think it is, this is us saying that real estate is an opportunity right now for those who have the down payment for it.
Until then, happy searching!🤓