Thinking of buying? Don't be put off by high rates.
Inflation continues to run hot, and on October 26th the Bank of Canada further raised its benchmark interest rate to temper it. However, this higher rate environment may have important potential benefits for buyers.
PRICES ARE FALLING
Yes, higher interest rates mean your interest payments will be higher, for a given principal size. However, when interest rates rise, house prices fall, as demand is depressed. This means that if you can afford to get into the market now, you may catch a deal.
BIG RATE INCREASES MAY BE TAPERING
The Bank of Canada signalled on October 26th that benchmark interest rates would continue to increase in the near future. However, there are positive signs on the inflation front, which may mean lower interest rates in the medium term. Slightly lower inflation in September was driven by lower fuel prices, which could pass through to the price of other goods. The Bank of Canada expects inflation to decline sharply in 2023, which would allow them to relax their tight monetary policy. This is good news if you plan to take a variable-rate or short-term fixed-rate mortgage. While your interest payments may be high in the short term, falling inflation in the medium term may lower your payments.
All this to say, there may be a great opportunity now to buy low if you can sustain the higher interest rates in the short term. There may be some positive news on the horizon that will make you grateful you jumped in.
For more information, feel free to reach out to:
John Chrisanthidis, Mortgage Broker (FSCO Lic. M08001294 Mortgage Intelligence FSCO Lic. 10428)