Why You Should Consider Buying A Home NOW
As the housing market continues to yo-yo during a global pandemic, you may be seeing opportunity and thinking more seriously about purchasing a home. Here are some reasons to consider buying now instead of waiting:
Mortgage rates are VERY low
Canadians saw their buying power increase mid-August as the benchmark five-year mortgage rate by the Bank of Canada fell for the third time this year, easing the stress test faced by all borrowers. The rate fell to 4.79%, after decreasing to 4.94% in May and to 5.04% in March. This decrease will allow you to qualify for just a little more than you could before.
As of this writing, there are mortgage promos for a 5-yr fixed as low as 1.84% (OAC, conditions do apply) up to about 2.24%. Locking in interest rates at these historic low levels certainly helps the household budget.
The prime rate is currently 2.45%. The prime lending rate is the annual interest rate Canada’s major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages. The prime rate has moved massively over time, ranging from historic highs around 23% in the early 1980s, to historic lows of 2.25% following the great recession.
Fixed rates have nowhere to go but up. Rates aren’t expected to skyrocket overnight, but don’t think that a small uptick wouldn’t affect your budget or qualification. In fact, if the rate was to go up by just 1%, your purchasing power would be reduced by approx. 9%. To put this in perspective: If you could afford a $400,000 loan at 4.79% stress-test rate, you could afford a loan of just $366,000 at 5.79%.
Underwriting
Mortgage underwriters assess your credit-worthiness and ability to repay a mortgage while ensuring that you and the property meet all the lenders’ requirements. Due to the global pandemic, lenders expect defaults to rise when government support measures expire. They are becoming more strict each day and there is little to no room for exceptions. More rules may be imposed in the coming weeks or months.
Lots of inventory to choose from
Canada is starting to build more homes than it has in the past few years, in the middle of a pandemic. There were 245,604 new home starts, seasonally adjusted at the annual rate in July. This is an increase of 11.1% compared to the same month last year. The number of starts is the highest level since November 2017. Statistics released by the Canadian Real Estate Association (CREA) show national home sales and new listings continued to rebound in July 2020, with new listings hitting their highest level on record.
Candace Perko
Mortgage Broker
Countryside Financial
www.countrysidefinancial.ca
