New Year's Resolutions and Mortgage Rate Trends: Navigating 2024
As we enter the new year, resolutions are in full swing, and for many Canadians, housing goals are a part of the plan. Whether it's the desire to purchase a first home, upgrade, or downsize in 2024, the evolving real estate market may have its own agenda.
According to Shaun Bernstein’s article in Real Estate Magazine, higher interest rates compared to the COVID-19 pandemic peak have impacted potential homebuyers, potentially slowing down their movements in the marketplace.
An economist with the Canadian Real Estate Association (CREA), Ryan Biln, highlighted some of the mortgage trends for the upcoming year in Bernstein’s insightful article.
So what are some of the key factors to focus on as a potential buyer in the current market?
Bond Yields
Understanding mortgage trends involves closely observing fluctuations in bond yields. In Bernstein’s article, Biln emphasizes the correlation between rising interest rates in 2023 and changes in bond yields. Following the trends of bond yields over the last three years provides a valuable perspective, aligning with the movement of interest rates.
During the pandemic’s onset, the economy faced a standstill, leading to a drop in bond yields and historically low interest rates. However, by late 2021 and early 2022, as inflation climbed, bond yields increased, subsequently pushing fixed mortgage rates higher.
Mortgage Stress Test
Even in a high-interest-rate environment, potential homebuyers need to navigate the dynamics of the mortgage stress test imposed by the Office of the Superintendent of Financial Institutions (OSFI). Biln points out that with rates being tested at close to 8%, a significant hurdle is presented for many buyers, contributing to a market standstill.
Final Predictions
While bond yields provide an essential indicator, Biln underscores that the ultimate factors influencing mortgage rates are inflation and interest rates. As per the Bank of Canada’s announcement in December, the benchmark interest rate remains unchanged at 5%, with predictions of the first rate cut in the spring of 2024. Bond yields have shown a decline, but substantial changes in Canadian mortgages will hinge on a reduction in inflation.
For those contemplating a home purchase in 2024, the good news is that inventory has increased in most markets, creating an advantage for buyers. As mentioned by Biln, buying in a market with increased inventory and less competition may lead to more negotiating power for homebuyers and their REALTOR®.
If purchasing a home is on your to-do list for 2024, Shaun Bernstein’s article provides valuable insights. Check it out HERE.
With a blend of informed decision-making and the right resources, potential homebuyers can navigate the complexities of the evolving real estate market in 2024.