Bank of Canada Rate Increase on July 12th, 2023
The Bank of Canada announced another rate increase this morning by 25 basis points. This marks the tenth interest rate increase since March 2022, with prime rates now at the highest it has been since 2001. It's our government's response to help reach our country's target goal of a 2% inflation rate by reducing excess consumer spending.
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With the cost of home ownership being more expensive due to higher borrowing costs, below are some tips for those who are in the market either buying or selling a property.
Tips for Buying
*for buyers who have taken the best first step by getting financially prequalified for a mortgage and securing a mortgage at a lower interest "rate hold", now is the time to act in a time-sensitive manner in order to secure a property. Also, ensure your closing date is prior to the expiry date of your rate hold. With most lenders offering a rate hold of 120 days (four months), keep in mind that lenders often request a minimum 30-day closing period meaning you want to aim to secure a home ideally no later than 45-60 days of your rate hold expiry date.
*while the market is much more relaxed for buyers, there are small pockets of the Greater Toronto Area (GTA) that are high in demand and experiencing multiple offers. About 25% to 30% of properties in the GTA are experiencing multiple offers at the moment. Work with an experienced real estate team who can guide you toward a successful property purchase depending on the hyper-local market you are looking to move to: give our team a call by clicking here, and we will help assess your needs in order to best guide you to a successful investment
*if you happen to be the only offer for a specific property, then keeping any required conditions in an offer is fine (e.g. a mortgage financing condition, a home inspection, or a lawyer review of a condo status certificate document etc). One thing to note is that from a seller's standpoint, any conditions in an offer are not favourable. It softens your negotiating standpoint, especially if you are negotiating more aggressively on the purchase price and/or your requested closing date is not ideal for the seller. Consult with your real estate agent to help provide the right guidance in order to best leverage your offer: for instance, tighten 5 business day conditions down to 3 business days. You'll want to work with an experienced real estate agent who can successfully negotiate on your behalf.
*the GTA has experienced an incredibly strong seller's market for several consecutive years up until March 2022 when mortgage rates began increasing. During that market, many buyers were eager to purchase a property nearly at their maximum budget which sometimes led to a purchase price that was higher than the appraised value. Now, in our current slower market that is very favourable for purchasing, it's interesting how certain purchasers who were engaged in the heated seller's market have now taken a back seat in hopes of forecasting the lowest point in our market. Many industry leaders and economists have predicted that the lowest point of our market has either already passed over the last eight months, or we are currently experiencing it. Unless you're an experienced investor looking to flip a property (in which case, being astute and extremely in-tune with market fluctuations is critical), the best advice is to get into the market if you're financially able to, take advantage of this slower market that often allows for conditions such as a home inspection, and focus on your long terms goals for the property (hold onto the property for at least the next five years).
Tips for Selling
*for the vast majority of properties for sale at the moment, it is best to price your property at market value. In general, this is not the market for multiple-offer pricing, especially in most areas of the GTA that are experiencing a slowdown: it will confuse many purchasers (purchasers do not like properties priced at multiple offers) and multiple-offer pricing will invite low offers coming in at around your multiple offer list price
*keep in mind that traditionally, the summer months experience a slow-down in buyer activity and activity begins to pick back up towards the end of August going into September
*work with an experienced real estate team who understands your hyper-local market and will continue to keep you informed of properties that are selling in the area and how long it spent on the market to obtain a certain price, you will also want your agent to keep you informed regularly of new inventory on the market in the neighbourhood, as well as properties that are remaining on the market for a considerable length of time. Feel free to get in touch with our team by clicking here, and we will assist you in understanding the real estate dynamics of your neighbourhood while outlining the best course of action leading towards a successful sale
If you're looking for guidance to navigate this market & effectively achieve your goals in selling or purchasing real estate, contact our team at 647-836-2895 ☎️
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