Historically Low Mortgage Rates Boost Canadian Real Estate Market
Register Now12.29.20
|
Buying
The Canadian real estate market is booming with no signal of slowing down. You did not read it wrong, and yes, it’s still 2020. An economic slowdown is almost expected after the world faced one of the worst public health crises in recent history. But, with the Canadian Government pulling the real estate mortgage rates to a record low, the effect of the slowdown is not as jarring for the real estate market. In fact, Canadian real estate is doing better than “just okay”; it is experiencing a strong rebound.
Here’s how low mortgage rates are giving the Canadian real estate market a new lease of life.
Cheaper to Buy
The Canadian central bank has committed to keeping the lending rates low well into 2023. So, the mortgage rates are going to stay low for the next year. This has encouraged people who are qualified for loans and planning to invest in real estate to go ahead and make a purchase.
In fact, this trend is already evident in 2020. Even in the past months of unpredictability, buyers have been making a beeline for homes. In fact, 2020 will register record real estate deals, with 544, 413 sales that will be closed by the end of December. So, in a hopefully more stable year of 2021, home sales are projected to make new records.
Increase in Market Size
With the lenders offering mortgages at record low rates, the 5-year benchmark rate for Bank of Canada is also set to drop. This is one of the most interesting developments in the Canadian real estate market. The federal benchmark rate is the basis for the mortgage stress test conducted by major banks. The stress test determines who qualifies for a mortgage.
With a more relaxed stress test, it becomes easier for buyers to qualify for home loans from major banks. Reduced rates lead to more buyers and more robust demand.
Appreciation in Sale Prices
The lower rates and increased demand boost the average sale price of the houses on the market. This is especially true for single-family homes that have come out as winners in the real estate market.
Moreover, there are many historically desirable markets in Canada, like Toronto and surrounding suburban areas. Strong demand for homes in these areas has slowly reduced the supply of homes in these areas. Couple it with the low mortgage rates and more people competing to buy, and you see the prices skyrocket.
The Canadian Real Estate Association (CREA) has forecasted that this buying frenzy will lead to an increase in home prices by as much as 9.1% in 2021. It believes that the blitzkrieg will continue through the better part of 2021 and create real estate records.
Real Estate Market is Setting New Records
The Canadian real estate market is performing well. In fact, it’s doing a stellar job. The demand, prices, and sales figures are setting new records, and the trend is set to continue into the new year. The historically low mortgage rates in Canada are enabling the market to create history.
