Why you marry the house, but date the rate

The last couple of Bank of Canada interest rate announcements have been holds, which has a lot of people breathing a sigh of relief. The general consensus is that interest rates will start coming down as early as April, and experts are predicting up to 4 rate reductions this year. So does that mean you should hold off buying until the rates come down?

The answer is no – and here's why. 

When interest rates are high, home prices come down. You can definitely get more for your money these days, but the downside is that you’ll be paying a much higher interest rate. Wait, don’t those two things kind of cancel each other out? 

It may seem that way, but buying a less expensive house in a high interest rate environment will put you a lot further ahead for a number of reasons – the main one being that the rate will change. 

If you’re like many people, and wait until interest rates come down, you’ll be competing with everyone else who waited. And that will mean higher prices and a smaller selection of available properties. On the other hand, if you buy now, yes, you’ll pay a higher interest rate (at least for a while), but you’re buying at a lower price, with less competition and more selection from sellers who are likely motivated. 

Saving 15%-20% or more on a property is a HUGE win. For one, your down payment will be that much smaller, and you could get into an area or a property that you couldn’t otherwise afford. And if you buy something that’s under a million (but would have been over a million a year ago), you won’t have to put down 20%.

So you marry the house (make a long-term commitment to the home) but date the rate (pay a higher rate short-term). Then, when interest rates come down, you’ll be in great shape. You can drop your monthly payments to pay less each month, or stick to the same amount every month and pay off your mortgage faster. 

You can’t time the market

Ultimately, it’s about the house itself, not about a short-term gain or timing the market to get the best possible deal. It’s about buying a place you love.

And who knows, you might not actually be able to find your dream house in this market. What matters most is finding a place you love and being able to afford it. And that could be now – or it could be when the market is blazing hot. It boils down to this: if you stay in the market long enough, it all somehow evens itself out because, ultimately, it’s not about timing the market, it’s time IN the market that counts.