Since March, Bank of Canada has made several cuts to its benchmark interest rate as a response to COVID-19. As of now, the prime rates are currently at 2.45%.
The next Bank of Canada meeting will be on April 15, 2020. Will they make further cuts to the interest rate? The central bank says it will “provide a full update of its outlook for the Canadian and global economies.”
The sudden appearance of COVID-19 caused uncertain times for many Canadian households. The biggest fear in many communities is not whether they will succumb to the virus but rather the financial instability that the lockdown brings with it. First-time home buyers are facing more questions than answers.
In the below blog post, we will try to give an outline of the situation to first-timers looking to secure a home and their first mortgage in these uncertain times.
Here are 3 ways the Bank of Canada rate cuts could affect first-time homebuyers
- Lower rates
Big interest rate cuts mean lower rates for you to pay. The decrease in your cost of borrowing will increase your buying power. This means you can choose from a broader range of properties to buy. However, if your dream home costs more than $1M, then you will likely not qualify for these low rates.
- More competition
Be prepared that lower interest rates will generate more competition in the housing market.
- Increasing home prices
Low rates + high demand = growing home prices. If you have less than 20% for your down payment, you could get a great rate but still have to pay the CMHC insurance.
Is it a good time to buy a house?
With strict social distancing measures in place, purchasing a house as a first-time home buyer during a pandemic is hard. Thankfully, the real estate market in Canada is making sharp adjustments to shift to a digital-only service.
It also helps that realtors have been declared essential workers.
So, what does it look like to buy your first home during coronavirus?
- More listings feature virtual tours than ever before
- You will be signing the forms digitally
- Securing your loan will happen entirely online (our office is working from home, for example!)
- Home inspectors are still inspecting homes but wear a hazmat suit, latex gloves, and respirators. They send the results to the clients electronically
- You may need to pick up the key to your new home from a lockbox
COVID-19 has presented us with a reality that we were not prepared for. The many restrictions pose unique obstacles to things that were stressful enough to do during regular times (such as buying your first home and qualifying for your first mortgage), let alone in the middle of a pandemic.
We’re here to help you and navigate you through everything related to your mortgage.
Call (905) 509-8164, and we’ll discuss your best options to finance your first home.