Experts feel Bank of Canada’s pause on the interest rates is a welcome move for variable rate mortgage holders and could create a hustle in the Canadian housing market. The central bank decided to hold its policy rate at 4.50 per cent after eight consecutive rate increases. This announcement is mostly likely to affect mortgage holders, especially those variable rate mortgage holders who have been under duress due to the constantly rising rates. For fixed-rate holders, there isn't any change at all. Affect on trigger rates: When a homeowner pays a mortgage and it is not able to cover the interest since their last mortgage payment, they are said to reach a trigger rate. Experts feel that the central bank's decision to hold rates means those who haven't reached their trigger rate may not do so in the near future. Those who want fixed-rate mortgages in the future are advised to get their loan pre-approved. This is a great tip as this lone move provides them a shield against any future rate hikes which come unexpectedly (a likeliness seeing the volatility of the markets). The positives: Experts feel the market may get a push due to the recent pause on the rate hike as the buyers will gain confidence and make the big move. Those who had lost hope due to continuous rate hikes will be back in the game. This pause in rate hikes may even make the housing market more stable even though prices may not fall from where they are right now.
What the rate-hike pause announcement means to the layman: For the borrowers or mortgage holders, this rate-hike pause brings in confidence that no more rate hikes are on the anvil and home prices will remain stable in the times to come. For the housing market, this implies, spring will be good as demand for new homes will grow in spring.
Experts feel there may now emerge a new kind of competition among buyers looking for 'turnkey' homes or homes that may require some work as they come cheaper. Those who pick such homes first may get the first mover advantage as such houses have been on the market for a while and no seller wants that. In general, people should go for three-year fixed-rate mortgages to prevent themselves from the onslaught of any further rate hikes. This gives them the power to reassess their mortgage situation if the rates still remain high. They won't be stuck with high rates for long.
If you want to know the impact of this rate-hike pause directly on your current mortgage situation or are a prospective buyer wanting to know more, do write to us at LendX Financial in Brampton, Greater Toronto Area.