Real estate experts have expressed optimism as the Bank of Canada chooses to maintain interest rates.
Bank of Canada rates remaining stable at five percent acts as a positive signal for those holding mortgages linked to prime interest rates.
Despite this encouraging news, the ongoing challenge of the high borrowing costs is expected to persist.
This Wednesday, the officials decided to keep Bank of Canada rates at five percent for the third consecutive meeting, marking the highest level in 22 years.
Relief for Mortgage Holders as Bank of Canada Rates Put on Hold
Daniel Vyner, principal broker at DV Capital, expressed that many will welcome this decision.
In a statement on Wednesday, Vyner mentioned,
“This news may bring relief to homeowners with a mortgage linked to prime. Even those who expected this decision or believe that a hold is preferable to an increase could find it reassuring.”
Offering a positive view, James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, described the recent interest rate decision as a “good news announcement for mortgage borrowers.”
In a written statement, James Laird mentioned,
“Those with a variable rate or home equity line of credit (HELOC) may find satisfaction in the positive direction of inflation, potentially leading to rate cuts in 2024.”
Daniel Vyner also highlighted that many homeowners might encounter a “payment shock” during renewal, but he mentioned that potential interest rate cuts next year could offer a “degree of relief.”
Navigating Mortgage Challenges in Today’s Market
Even with the optimistic news for mortgage owners, Ratesdotca real estate expert Victor Tran pointed out that people still encounter challenges due to heightened borrowing costs.
In a written statement, Victor Tran expressed relief stating,
“It’s comforting that their rates and payments won’t increase. However, in these challenging times, it hasn’t been this expensive in a very long time.”
“Decreases in bond yields are starting to influence interest rate offerings from select mortgage lenders, widening the gap between fixed and variable rates currently.”
Regarding choosing a mortgage product, he emphasized that it depends on each customer’s situation.
However, Tran mentioned that in the last year and a half, the majority of his clients were “leaning toward” fixed-rate products for added stability.
Tran observed a shift, stating,
“Now, the variable rate is surging back in popularity, primarily due to the news indicating that we’re essentially at the peak of interest rates.”
Flexibility is Key for Mortgage Owners
Alana Riley, head of insurance, mortgages, and banking solutions at IG Wealth Management, anticipates that prime rates will remain at 7.2 percent following the recent decision on Wednesday.
In a written statement, Alana Riley expressed concern, stating,
“This rate is burdensome to household cash flow for Canadians with variable rate mortgages, HELOCs, and unsecured lines of credit.”
Riley emphasized the dynamic nature of the situation for mortgage owners heading into 2024, mentioning it will be influenced by “multiple variables.”
She pointed out that the trajectory of interest rates will depend on economic conditions, inflation, and other factors, advising mortgage owners to adopt a proactive approach in staying informed about market developments due to the expected uncertainty.
Emphasizing the importance of flexibility, Alana Riley stated,
“Flexibility will be critical, as adjustments to mortgage strategies may be necessary based on market shifts.”
Experts Anticipate Potential Rebound Amidst Rate Cut Speculations
James Laird suggested that Wednesday’s announcement is expected to have a muted impact on the housing market in the near term, particularly given the typical seasonal slowdown in December.
However, he noted that anticipation of future rate cuts could potentially support a housing market rebound in the new year.
Victor Tran mentioned that interest rates could potentially drop next year, possibly in the second or third quarter, which might stimulate activity in the housing market.
Despite ongoing demand in the current market, he noted that buyers are currently being “pushed to the sidelines” as they await potential opportunities.
Victor Tran expressed his anticipation, stating,
“Once the Bank of Canada rates drop, which could happen in the second quarter of next year, I think that’s going to signal to buyers that there’s probably going to be more rate drops to follow. I believe buyers will jump off the sidelines and enter the market, making it quite busy once that happens.”