After aggressively hiking interest rates to curb inflation, the Bank of Canada finally started its rate-cutting streak in June 2024. The central bank has made seven consecutive rate cuts since then, bringing the policy rate down from 5% to 2.75%. In an ideal, trade-war-free world, these rate cuts and new mortgage reforms would have been more than enough to convince potential buyers to get off the sidelines. However, the trade war uncertainty has instead caused buyers to remain on the sidelines, waiting for more rate cuts and other favourable conditions before moving forward.

But is it wise to wait for more rate cuts, or would it be better to buy a house for sale in Brampton now, while rates are still relatively lower? Let’s explore this in-depth below!

In its last announcement on April 16, the Bank of Canada kept the policy rate steady at 2.75%. But despite this rate hold decision, mortgage rates are still trending towards multi-year lows. According to NerdWallet, some variable-rate mortgages have now dropped to around 4%. While this is a bit higher than the 3.23% average variable rates between 2013 and 2023, it is still significantly lower than the rates of recent years. Fixed mortgage rates have also dropped well below 4%. 

Below are the potential advantages and the risks of holding out for lower interest rates than this –

One of the biggest reasons home buyers consider waiting is the potential to lock in a lower monthly mortgage payment. If interest rates drop, your monthly mortgage payments could shrink, saving you money each month. You can use that extra cash for renovations, savings, or other life goals.

The above example was created using The Canadian Home’s Mortgage Calculator, considering a minimum down payment, a home price of $750,000 and a 25-year amortization period.

Interest rates sourced from Nerdwallet’s “Weekly Average Historical Posted Mortgage Rates (Five-Year Fixed)”

Lower interest rates reduce your monthly mortgage payment, improve your DTI ratio and help you qualify for a bigger mortgage. With a higher loan amount, you can consider more expensive houses for sale in Brampton than you can afford right now. 

Historically, housing demand and prices have increased whenever borrowing costs have become cheaper. So, even though your mortgage rate might be lower, the cost of the home itself would be higher. In hot markets like Brampton, that price increase might cancel out or even outweigh any savings you would get from a lower mortgage rate.

Monthly average home prices sourced from The Canadian Home’s GTA Housing Market Trends

Interest rate data is sourced from NerdWallet’s weekly average posted mortgage rates report, focusing on 5-year fixed rates for the last week of each month in 2022.

Every month you delay buying a home is a month you are not building equity. By continuing to rent, you are basically helping your landlord with equity building while putting your equity building on pause.

The general forecast is that the growing recession risks and a softening labour market will push the Bank of Canada to resume its rate cut cycle in its next announcements. However, remember that these interest rate projections are just educated guesses. Not even the top economists can predict the bank’s rate cut decisions with certainty. 

The Bank of Canada makes its policy rate decisions based on various factors, including GDP growth, inflation trends, unemployment rates, and global events like the trade conflict. Any unexpected shift in these variables could prompt the Bank of Canada to delay rate cuts or even raise rates again. Hence, betting your entire home-buying strategy on future rate cuts could mean missing out on the current opportunities. 

Home prices in Brampton have been steadily increasing over the last few months. If that trend continues, the potential savings from a rate cut could be cancelled or outweighed by the higher purchase price. 

Let’s break this down with an example – suppose mortgage rates in Canada drop by 0.25%. On a $800,000 house with a minimum down payment and a 30-year amortization loan, that rate cut might save you around $100-$120 monthly on your mortgage. But at that same time, if home prices go up by 3%, that $800,000 home could cost you $824,000. That extra $24,000 will cost you more over time than what you will save from the rate drop.

Hence, if you see consistent home price growth in the area you are interested in, buying sooner might make more financial sense. 

If your finances are in order and the down payment is ready, now might be the best time to look for your dream house in Brampton. Waiting around for the “perfect” rate could mean missing out on homes that fit your lifestyle and budget today. 

Short-term rate changes may not matter much if you plan to stay in your new home for five years or more. Over time, you will likely benefit from property appreciation and equity building. And also, if interest rates drop significantly later, you could always refinance.

If the current mortgage rates push your monthly payments outside your comfort zone, you shouldn’t rush into homeownership. Buying a house should feel like a step forward, not a burden.

Are you happy renting now, or have the flexibility to wait and see where the housing market goes? If that’s the case, there is nothing wrong with taking a wait-and-see approach. 

No crystal ball can predict exactly which direction mortgage rates or home prices will go. That’s why real estate experts advise homebuyers to focus on their readiness instead of trying to time the housing market. When you are financially ready, confident, and prepared, that is the best time to step into homeownership. So, instead of asking “Should I wait?”, ask yourself, “Can I comfortably afford a home at today’s prices and rates?” If the answer is yes, then now might be the best time to leap into homeownership in Brampton.