Finally some good news with regards to interest rates… Most lending professionals are predicting a gradual reduction of the Bank of Canada prime lending rate – and associated bank mortgage rates – over the next few years. No one believes we’ll see BoC rates as low as the 0.25% borrowers enjoyed as recently as March of 2022, but the smart money is looking forward to a sub-five percent prime rate in mid-to-late 2024. Important to note, however, that the lenders we speak to are predicting more competitive bank rates as soon as early 2024.

A dropping consumer borrowing rate can have multiple effects on purchasers of real estate. Since the borrower’s acid test is based on a calculation of monthly cash flow in relation to income, a lower interest rate means lower monthly payments, which leaves more room in the calculation for other things like utilities, property taxes and condo fees. Alternatively, maintaining the SAME monthly payment with lower mortgage rates means the mortgage principal amount can be higher. The tangible effect of the math is that buyers can either afford more expensive houses or can qualify to put less of a down payment on a given home. This is why dropping interest rates kick start investment.

Even before lower borrowing rates arrive, there are strategies that can be employed in today’s market to give buyers a competitive advantage. As prices have settled, we’re starting to see some really attractive buying opportunities. Combine this with the forecast of lower rates, and we’re in a position for the first time in years to get our clients some great deals.

For a more personalized assessment of the effects of dropping rates on your particular situation, don’t hesitate to contact your Deakin Realty broker.