If you’ve been debating your first home purchase or playing around with the idea of adding another property to your portfolio, now could not be a better time. With the Bank of Canada boasting historically low-interest rates that show little sign of fluctuation, the opportunity is beckoning.
What Rates Are Affected?
When we talk about low mortgage rates, we are referring to the power the Bank of Canada possesses to affect policy interest rates.
Why Does the Bank of Canada Affect This?
It does seem controversial, at first glance, for the Bank of Canada to have so much power over the other banks in Canada and their mortgage products. However, the mechanism at play here offers consumer protection that prevents adverse effects on the inflation rate.
When the economy is doing well and our country is prosperous, the Bank of Canada raises policy interest rates. This discourages excessive spending and keeps our citizenry moderate. When the economy is suffering a depression or influenced by global affairs (pandemics, trade tensions, etc.), the interest rate is lowered. Lowering the interest rate encourages people to spend, sometimes in spite of rising prices, and offers a solution for shy or cautious investors.
Just How Low Are Policy Interest Rates?
Understanding the mechanism behind the changes helps us have a better context for the decision, but is anything really different? Obviously, the Bank of Canada adjusts this rate to match our current economic situation, so it must change all the time right? Well, yes and no.
Yes, the rate will change as new factors and conditions affect our markets. However, right now we are in the midst of historically low rates. Just how low are they? Right now the policy interest rate is set at just 0.25%.
Why Now Is the Perfect Time to Buy
Of course, as homebuyers, we will not only pay this incredibly low rate. Our financial institutions are still beholden to their employees, investors and the free market, so they apply their own rates on top of the policy set by the Bank of Canada. However, this rate is so low that we are seeing fixed rates actually exceed variable rates, a notoriously rare circumstance.
So, what do all these changes mean for mortgage holders or soon-to-be homebuyers? It means that you have access to some of the greatest selections in the real estate market, at some of the lowest historical prices. Still, this great opportunity cannot last forever. As global conditions change or improve, we are certainly going to see changes coming from our financial regulators. Therefore, don’t delay in calling 2% Realty for a free consultation today!