The decrease in the Bank of Canada’s (BoC) interest rate has helped buyers gain more confidence in the real estate market, but an Ottawa real estate broker says uncertainty remains an issue leaving some buyers skeptical.
The Bank of Canada cut its rate by 25 basis points on June 5, putting the policy rate at 4.75 per cent, down from the 5 per cent it has been sitting at since July of last year. The next rate announcement is scheduled for July 24.
Taylor Bennett, broker from Bennett Property Shop told CTV Morning Live Monday a one per cent rise or decrease in interest rate can change your purchasing power by 10 per cent. For example, an increase of 0.25 per cent changes your mortgage rate by a 2.5 per cent, and vice versa, he explains.
“But also take note that the rate takes effect when you finalize your mortgage, not when you get your mortgage preapproval,” he said.
Bennett recommends shopping around to find the best lender.
“Just because you do your banking with one individual bank, that might not be the best lender for you. So, shop it around, get better rates,” he added.
It’s very important to lock in a rate with the best lender as you’re shopping around, Bennett notes.
“I had a buyer recently that didn’t lock in and they didn’t really renew their rate as they were shopping around and they thought that as long as I buy a house before the expiration date, I’m okay,” Bennett said. “Well, no. It’s when you have to move into the property. So, keep in mind if it’s taking a little too long to find your home, just contact your lender, renew that and they’ll extend the expiration date for you.”
A lot of buyers are getting scared of making multiple offers, he says, noting that during the pandemic, “there were a $100,000, $200,000 over asking (prices).” He adds that nowadays, multiple offers are being made not because of the asking price, but more because of the conditions and closing date.
He notes that buyers should keep in mind that they’re always in control, recommending that they shouldn’t panic and think that they have to outbid everybody.
“No matter how many other offers come in, you’re not forced to add any extra dollars into your price,” he added.
Bennett also recommends taking into consideration how long you are going to stay at that property, citing that the duration might dictate how much you would want to spend on it.
“If you only gonna be there for two or three years, then obviously you don’t want to overspend on it. If it’s gonna be a home you gonna stay at for over a decade, there’s gonna be a lot of equity growing during that decade, even if you over pay a little bit,” Bennett said.
Not every property listing is actually online, he says, adding that some listing agents might a listing that’s not yet on the market, such as an “exclusive” or “pocket listing.” Bennett says some of those properties might be a great fit for you, noting that they might not yet be on the market yet, as the seller might be looking for another home before selling.
With files from CTV National News’ Jordan Gowling
