You’ve now saved up enough for a down payment, your credit is in great shape, you are gainfully employed, and you’ve even saved enough for closing costs and moving expenses. Things are looking great. You’re ready to start house hunting!

You’ve worked very hard to get to this point and your excitement at the prospect of buying a home is off the charts so the last thing you want to hear is that you should hold off on home shopping for now and wait until market conditions are perfect.

Wait?!? But how long?

The goal is to seize the opportunity when the Canadian housing market corrects and secure a mortgage during a period of lowered interest rates.

Both the Canadian Real Estate Association (CREA) and the Canada Mortgage and Housing Corporation (CMHC) are aligned in their prediction that home prices will undergo a decline throughout 2023 due to a scarcity in supply and the lingering effects of recent Bank of Canada (BoC) rate hikes (with another projected increase in September). This presents a favorable circumstance for potential homebuyers aiming to capitalize on more affordable or stable property prices.

Regarding mortgage rates, once the BoC successfully reins in inflation back to the targeted 2%, CREA and CMHC anticipate a reversal of the substantial rate escalations. This shift should result in a reduction of mortgage rates, easing the financial burden on borrowers. Encouragingly, this decrease is expected to catalyze a resurgence in home prices and sales activity by the middle to end of2024. Additionally, other factors contributing to this trend include a surge in immigration, the scheduled lifting of the foreign buyers’ restriction at the close of 2025, and insufficient construction of new homes, all collectively adding to the burgeoning demand and subsequent price hikes anticipated in 2025.

To recap, higher rates dampen home prices, rendering buying slightly more affordable, but higher mortgage rates translate to increased monthly payments, potentially straining your financial stability. Conversely, as mortgage rates decrease, monthly payments become more manageable, yet these lower rates have a stimulating effect on the housing market, consequently driving property prices upwards.

This seems like an unsolvable conundrum. The truth is, navigating the timing of the market can be perplexing. Similar to any significant financial decision, seeking advice from a specialist who can analyze your circumstances, objectives, and priorities is crucial for gaining clarity. Opting to purchase during a phase of lower home prices but higher mortgage rates might appear counterintuitive. However, considering that mortgage rates can eventually drop, you'll eventually have the luxury of extra funds. Since you've adjusted to the higher mortgage payments, maintaining the same budget and directing the surplus funds toward mortgage prepayments could pave the way to a mortgage-free future.

A strategy of observation and evaluation could yield substantial benefits in a few years. During this period, leveraging the tax advantages of the First Time Home Savings Account, along with the RSP Home Buyers’ Plan, can contribute to bolstering your down payment, thereby reducing the necessary mortgage amount when you decide to make a purchase.

Becoming a homeowner signifies a momentous achievement, and the sense of accomplishment is undoubtedly gratifying. Naturally, all factors should be weighed, and emotional decisions must be avoided when making financial choices. A pivotal aspect of any home acquisition is constructing a plan that encompasses both short- and long-term perspectives. This is the juncture where the expertise of your Lendlab mortgage professional can profoundly impact your journey toward homeownership.

We are your Vancouver Island mortgage brokers serving you in Victoria, Nanaimo, The Cowichan Valley, Parksville, Qualicum, and beyond!