How to Buy a Waterloo Region Home Following Bank of Canada’s Interest Rate Hike
In July of this year, the Bank of Canada raised its benchmark lending rate a full percentage point, bumping it up to 2.5 per cent. This prompted Canadian banks to hike their prime lending rate to 4.7 per cent — the highest it's been in more than 10 years. Which has distressed a lot of people, including those who were planning to buy or sell a Waterloo Region home.
It's easy to decide to err on the side of extreme caution - especially as experts say that another lending rate hike may yet still be on the horizon - and decide to put those plans on ice and 'wait and see' what happens.
Easy in theory, but most people have a reason to move, and those reasons are unlikely to go away. Couple this with the fact that after months of a very hot, often hard to enter housing market across Canada, including in the Waterloo Region, a more balanced market seems to be heading our way.
Homes are still selling, but prices are levelling out, and for those who have been struggling to get on the property ladder, even with the rise in mortgage interest rates there may never be a better time to buy, as long as you enter into a home search with your eyes open, an experienced local real estate broker at your side, and you keep the following tips in mind:
Don't Try to 'Time' the Market
Buyers and sellers should keep in mind non-financial issues when deciding whether to enter the home market because it is constantly changing. Don't put off making a decision in the hopes of getting a better price next month or next year if you need to upsize, downsize, or have secured a down payment and are prepared to move.
When Waterloo Region prices start to rise again and the chance to purchase at that price has passed - as in the price that Waterloo Regions homes are being offered at right now - that is when you will know the market has reached its bottom, and by that time your chance will have passed.
Be Open to Budget Adjustments
When interest rates are lower, home buyers are often able to secure larger mortgage loans, meaning they can afford a higher-priced home. Now that interest rates are rising, you should work with an experienced local real estate agent to understand what you can afford in today’s market.
The local part is especially important right now, as only those of us who actively work in the Waterloo Region real estate market every day have the 'real time' knowledge you'll need to truly understand what you can afford, as well as access to new listings far faster than those out of area brokerages and, in some cases, even before listings hit the MLS.
As we are entering a more balanced market, some listing prices will begin to start coming down, so you may be pleasantly surprised with what your dollar can buy you.
If you haven’t found that dream property but you are actively looking, securing your mortgage pre-approval now is also helpful to lock in at a lower rate before the Bank of Canada makes further adjustments this year. Most pre-approvals are good for four months, which might just get you through future rate increases.
Make Sure You Review ALL Your Mortgage Loan Options
Now is the time to shop for a mortgage - and really understand your options - even more carefully than before. One way to do this quickly, efficiently and to feel secure in the knowledge that you are making the right choice for you is to work with an independent mortgage broker.
These are the pros who will take the time to find out just what options are open to you, explain them all to you and then help you make the right decision without telling you what to do, or which lender to go with.
If you need a referral to a good mortgage broker, your local real estate agent will be a big help here too, as we work with them all the time and will be happy to introduce you to the one that's right for you.
Be Open on Location
Often, when people, especially first time buyers, start looking for a home they have a specific area, often a specific neighbourhood in mind. This is even true in the Waterloo Region. However, that tunnel vision can prevent you from finding a great home.
The Waterloo Region is a wonderful place, home to all kinds of housing types, neighbourhoods and unless you already live here and have for a long time, maybe even places yo have never been to or even knew much about.
While your real estate agent will always show you just what is available in your preferred locales, stay open to other areas, especially if the pricing is a little lower or you can get more 'bang for your buck' by being a little more flexible.
Obviously, no real estate agent will ever tell you which home to buy, but by trusting our knowledge and expertise when it comes to the area we work in on a daily basis that dream home may be hiding in plain sight, just not quite where you expected it to be.