The real estate market moves fast, and so do interest rates. If you're feeling unsure about which mortgage product to choose right now, you're not alone. Here's what you need to know to make a smart decision.
Interest rates have been on the rise, but we're starting to see a shift. Inflation is coming down, and as a result, the Bank of Canada has already started lowering interest rates. The big question is: how fast will they keep dropping, and what does that mean for your mortgage?
If you’ve got a variable rate mortgage, you’re already feeling some relief, but the key is understanding what comes next.
“Don’t just make a decision based on fear or hype. It’s about looking at your personal situation, not what everyone else is saying.”
Right now, interest rates are expected to continue dropping slowly over the next year, but what should you do? Should you lock in a fixed rate or stick with a variable one? These are the kinds of questions I get every single day from people just like you.
1. Are you making a decision based on the lowest rate or based on your unique financial situation?
2. How comfortable are you with fluctuating rates?
3. Do you have the flexibility to adjust if things change?
Variable rates may not always look like the best deal up front, but they have the potential to save you money in the long run as interest rates continue to drop.
1. Quarter-Point Drops Add Up: Each rate cut brings more savings. The recent drops have already reduced costs for those with variable rates.
2. Flexibility: You’re not locked into a high fixed rate if rates continue to decline. Variable rate penalties are usually lower, making it easier to pivot if you need to.
“Fixed rates can offer peace of mind, but right now, locking into a long-term fixed rate might not be the best move.”
Most experts agree that locking into a five-year fixed rate isn’t the smartest play right now. Rates are projected to keep falling, and locking in at today’s fixed rates could mean paying more than you need to over time.
Instead, consider a shorter fixed term, like three years, if you’re uncomfortable with the volatility of a variable rate.
“The market is still shifting, but we’re already seeing signs of a rebound in certain areas, especially for single-family homes.”
While the condo market in some areas may still be soft, single-family homes are holding strong and even growing in value in certain markets across the country.
Why? The demand for detached homes remains high, and the supply is limited. Despite rising costs, the scarcity of land and homes in desirable locations is keeping prices steady or even pushing them higher.
“Mortgage products aren’t one-size-fits-all. The right choice depends on your personal financial goals and comfort level with risk.”
- Your current financial situation and future plans.
- How comfortable you are with rate fluctuations.
- The flexibility you need in the next few years.
1. Variable rates are flexible and could save you money as rates drop.
2. Short-term fixed rates can offer stability without locking you into a long-term commitment.
3. Long-term fixed rates might be less appealing right now due to the projected rate cuts.
As we move through the rest of 2024, we expect to see continued interest rate cuts, which could lead to a stronger housing market rebound in 2025. For now, staying flexible and informed is key.
Whether you’re a first-time buyer or looking to upgrade, understanding the trends and making decisions based on where the market is headed will help you come out ahead.
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