First-time homebuyers and real estate investors should take advantage of the housing market while interest rates are low, mortgage professionals say.
The Bank of Canada held the policy rate at 2.25 per cent, for the second consecutive time, to kick off the start of the New Year.
“This is really a rare opportunity for a first-time buyer to enter the market at a much more affordable price than they would have been able to do five or 10 years ago,” said Anne-Elise Cuglari Allegritti, vice president of research and communications for Royal LePage in an interview on Wednesday.
Economists widely expected the bank to hold interest rates steady. Governor Tiff Macklem says uncertainty remains high around geopolitical risks amid the pending review of Canada-U.S.-Mexico Agreement (CUSMA).
“It’s a good time for first-time home buyers to, you know, maybe get off the fence,” said Keith Redding, senior director of Research at Morguard. “I mean, it might not get better than it is today.”
Cuglari Allegri said interest rates can spur confidence but, with the average age of a first-time home buyer in their mid 30s, an entry-level property may not fit the bill.”
“We’re at this interesting crossroads where the older people are when they enter the market. They sort of need more space to accommodate their households needs,” said Cuglari Allegri.
Variable mortgages vs. fixed mortgages
Homeowners can choose between a fixed or variable mortgage but Cuglari Allegri says the choice depends on their risk tolerance.
“It’s such a personal choice and based on how much you know risk a person is willing to or a household is willing to endure and for how long,” said Cuglari Allegri.
Real Estate Investment Trusts could be a good option
The central bank’s hold on interest rates makes it cheaper to purchase Canadian Real Estate Investment Trust (REITS) that finance property purchase and real estate transactions. With the vacancy rate down, Reading said it might be a good time to purchase a REIT with predominant office holdings.
“Now might be the time to hold on to that investment, to try to capitalize on what we think is going to be a modest recovery,” said Reading. “There’s certainly more optimism with regard to the office market.”
He said it’s never a bad time to reassess your portfolio and diversify in different investments.