With recent shifts in home prices and mortgage rates in Canada, many Canadians are wondering about the best next steps in their homeownership journey.
Whether you’re a current homeowner or someone considering buying a home, today’s market conditions mean that a well-informed strategy is essential.
In this article, we’ll explore how the current Canadian housing market affects your options, whether you’re thinking about buying, refinancing, or simply assessing your options for the future.
Current State of the Canadian Housing Market
What’s Happening with Home Prices?
Real estate prices in Canada have dropped by 22% over the last 2.5 years. Sourced from wowa.ca.
The Canadian housing market has seen a rollercoaster of price changes over the past few years. In some areas, prices have cooled slightly, while in other regions, home prices remain high due to demand. For those considering buying or selling, understanding these trends is key.
Currently, housing prices are about 22% lower on average across Canada, compared to their peaks in 2022.
Many factors impact Canadian home prices, including economic changes, government policies, and inventory shortages. Current conditions mean that some areas may provide better opportunities for buyers, while others still favor sellers.
Impact of Mortgage Rates on Buying Power
Home buyer reviewing mortgage rates in Canada
Mortgage rates in Canada have decreased notably over the last 6 months, directly affecting affordability and buying power.
Lower rates mean lower monthly payments, higher affordability, and overall positive impact on what buyers can afford.
Understanding the impact of these rates is essential for anyone considering purchasing a home in today’s market or making changes to their current mortgage.
Considering Buying a Home? Here’s What You Need to Know
Buying a home in a higher-rate environment might seem challenging, but with the right strategies (taking advantage of falling rate), it’s possible to navigate this market and save a lot of money.
Here are a few tips to consider:
1. Get Pre-Approved for Your Mortgage
Getting pre-approved will give you an accurate picture of how much home you can afford based on current rates.
It’s also a valuable tool for narrowing your search and making competitive offers when you find the right property.
Pre-approval also lets you lock in a rate for a certain period, offering some protection if rates change.
With the market expected to get hot again in the Spring 2025, a pre-approval is a must if you’re planning on buying come April.
2. Choose the Right Type of Mortgage
Choosing between fixed and variable rate mortgages is a big decision, especially in a market with changes rates.
A fixed-rate mortgage offers stability, locking in your interest rate for the term of the mortgage.
A variable rate may fluctuate with market conditions, but it could offer savings if rates decrease further (which they will from here).
Speak with a mortgage advisor to determine which option aligns best with your financial goals (KEY POINT: your mortgage term will determine what type you should choose (1, 2, 3, or 5 years).
Should You Refinance Your Mortgage in Today’s Market?
Couple considering refinancing their mortgage
Refinancing is a tool that many homeowners use to adjust their finances, whether it’s to secure a lower interest rate, change monthly payment terms, or access home equity for other purposes.
With the recent decrease in mortgage rates, refinancing may be beneficial to your finances (especially if you got your current mortgage in the last 1-2 years).
1. When Does Refinancing Make Sense?
If your current mortgage has a variable rate and you’d prefer the stability of a fixed rate, refinancing could allow you to lock in a rate for added peace of mind.
Additionally, if you have significant home equity, refinancing can give you access to funds that can be used for home improvements, investments, getting a down payment on another property, and other goals.
2. Assessing Your Financial Goals
When considering refinancing, it’s important to think about your long-term goals. Ask yourself:
- Do you want lower monthly payments?
- Are you looking for a way to access funds for a major purchase or investment?
- Are you struggling with monthly cash flow?
- Would you like to decrease your amortization (pay down your mortgage sooner)?
Understanding your objectives will help you determine if refinancing is right for you. This is exactly what a mortgage broker can help you with.
Exploring Homeownership Options for the Future
Family reviewing Canadian homeownership options
If you’re not quite ready to buy or refinance, that’s okay too! There are still many steps you can take to be prepared when the timing is right. Here are a few:
1. Improve Your Credit Score
Your credit score plays a significant role in determining mortgage rates and terms. By maintaining a healthy credit score, you’ll be better positioned to secure favorable rates when you’re ready to buy or refinance.
If you’re not aware of what goes into a credit score, read this explanation.
2. Save for a Larger Down Payment
Having a larger down payment can reduce your monthly mortgage payments, making homeownership more affordable. Consider setting aside funds each month to build your down payment savings.
And if you weren’t aware you can use your RRSP funds towards your first home!
3. Stay Informed About Market Trends
The Canadian housing market can change quickly, and staying informed about home prices and mortgage rates in Canada can help you make timely, well-informed decisions.
Mortgage advisors (like us!) offer market insights and updates to help you stay on top of these trends.
Final Thoughts: Is Now the Right Time for Your Next Move?
Whether you’re considering buying, refinancing, or simply planning for the future, understanding the current Canadian housing market is crucial. With decreasing mortgage rates and changing home prices, now is the time to make informed decisions based on your unique situation.
If you’re ready to take the next step or if you’d just like to explore your options, I’m here to help.
Reach out anytime to discuss what the current market means for you and how we can create a strategy that aligns with your goals.