Should You Wait for Lower Mortgage Rates? Maybe Not...
Many Canadians are sitting on the sidelines, waiting for mortgage rates to drop before buying a home. In fact, a recent BMO survey shows that 67% of people are holding off for better rates. But is waiting really the smart move?
Let’s break this down in simple terms.
Why Waiting Can Be Risky
It might feel like you're being smart by waiting, but here are a few things to consider:
- You can't time the market. Predicting interest rate movements is nearly impossible. It’s a bit like gambling and hoping for a perfect hand.
- Rates could go up instead. Just because rates went down recently doesn’t mean they’ll stay down for a long time.
- You might face stiff competition later. When rates do eventually drop, everyone who’s been waiting could jump back into the market, leading to bidding wars and higher home prices.
Today’s Rates Are Actually Pretty Good
Here’s something most people don’t realize: over the past 30 years, the average 5-year fixed mortgage rate has been about 4.59%. Right now, it's around 4.44%. That’s actually lower than the long-term average.
We’ve gotten used to ultra-low rates from the last decade, but those were the exception, not the norm. When you look at the big picture, today’s rates are very reasonable.
Inflation Changes the Math
When you factor in inflation, mortgage rates today are even more attractive. “Real” interest rates - the cost of borrowing after adjusting for inflation- are currently lower than usual.
That means you’re paying less in real terms to borrow money. But this won’t last forever. Inflation is still a concern, and if it rises again, rates could follow.
Other Risks That Could Push Rates Higher
There are also global factors that affect our mortgage rates, like:
- Rising U.S. debt and interest rates
- Global investor concerns
- Possible trade tensions
If Canadian bonds become less attractive to investors because of these issues, our mortgage rates could go up too—even if the Bank of Canada doesn’t raise its key overnight rate.
The Bottom Line
Waiting for the “perfect” rate could backfire. Not only are today’s 5-year fixed rates already below average, but the future could bring higher rates and more competition for homes.
If you’re planning to stay in your home for the long term, locking in a 5-year fixed rate now could offer you:
- Predictable monthly payments
- Protection from rising rates
- Peace of mind
Rates don’t need to hit rock bottom for you to make a smart move. They just need to make sense for your situation - and right now, they do.
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