COVID-19 has impacted Canada’s housing market in several ways, and the effects will continue for the next couple of years. One of the most significant changes has been a drop in interest rates, which has resulted in a boom in housing sales. However, will mortgage rates continue to stay low, or will they begin to rise? And if they do go up, will real estate sales fall?
While we encourage you to talk with your mortgage broker in Ontario, let’s also look at some ways that COVID-19 could continue to affect your mortgage rates.
Low Interest Rates in Canada
Throughout the last several months, the Bank of Canada has held interest rates low, currently at 0.25 percent. With such low rates, some homebuyers have been rushing to lock them in with pre-approvals and rate-holds before they start rising. Getting pre-approved means that your lender will still honour the interest rate you were first offered even if rates increase. The same goes for rate-holds that last about 130 days.
Getting a low mortgage rate means savings for you, the buyer, especially as the Bank of Canada has already signaled that it may start increasing the rates in the spring of 2022. A hike in the interest rate is expected as vaccination rates rise and the risk of COVID-19 subsides. With housing prices skyrocketing in many markets, paying less for your mortgage can be the break that homebuyers need.
Refinancing Still Sought After
Low mortgage and interest rates had many homeowners looking to refinance their loans. Many were able to save through a change in terms, which is a welcome relief as the economy sputters back to life after the pandemic.
COVID-19 also saw many more people investing in renovations and upgrades on their homes. These changes could prompt homeowners to apply for cashback refinance loans. Cashback refinancing allows you to access some of the equity in your home for things like repairs and renovations. Spending your equity in this way is seen as a good investment, as you’ll be able to sell it for more.
Increase in Houses for Sale
Real estate has been a robust investment for many years in Canada. And the pandemic has not changed homebuyers’ dreams of property ownership. Although some sellers paused their plans as COVID-19 spread, the vaccine may prompt them to now put their homes on the market. As more Canadians are vaccinated, homeowners will feel safer hosting open houses and having visitors see their properties. If that were to happen, then Canadians dreaming of owning a home would be inclined to buy even if interest rates were to rise.