Urgent Real Estate & Mortgage News: Bank of Canada Interest Rate Announcement, the current state of the Economy and Market & Spring Real Estate Market Preparation

The Bank of Canada just announced a pause to the Overnight Lending Rate and keeping the rate to 4.50%. This will be the first time in the last 12 months that we have had not a Rate Increase. One of the main reasons of the pause was based on the CPI Data and Economic data proving that Inflation is decreasing in Canada and broadly based, and our economy has been stagnant quarter over quarter and has shrunk month over month. That see’s like partially good news but the double edge sword is the job report numbers. It seems like a good thing when people are working and new jobs being created, the down side to this is while there trying to control and decrease inflation and make sure we don’t have sticky inflation, they want to see the job numbers down and closer to there predictions. Economists do warn though that the numbers are slightly flawed because the last report showed an increase of 115,000 jobs while that number was later updated to 65,000. With numbers like this, the “negative” side from the Bank of Canada’s perspective is that the economy is showing signs of strength and it makes it very difficult to rationalize any rate decreases with such positive signs. On the other hand, the Bank of Canada knows it cannot have a knee jerk reaction to the initial reports and must look at every Consumer Price Index (CPI) and Job Report data that is being provided more vigorously before making future policy decisions. Let’s take a quick look at what this decision means for you and your possible qualifying chances!

  • The Overnight Lending Rate did not increase. That’s a good thing, right?

Let’s take a dive into this! As mentioned above, signs of a strong economy are a good thing for everyone. Unfortunately, when you’re trying to tame inflation and make sure it’s not something that sticks around for a prolonged period, it’s not. The Bank of Canada is trying to shrink the economy and stop spending, they call this measure Quantitative Tightening. There trying to stop spending and with this reduce or stop growth completely. Job Numbers decrease and unemployment is slightly higher than usual, creating a negative GDP. Once there has been 2 consecutive quarters of negative GDP, this a recession. How bad and how long we stay in a recession usually depends on how we adjust our spending patterns and how this adjusts to these patterns. If businesses keep growing and hiring and spending stays high, we are at risk for a prolonged recession and sticky inflation meaning the prices we see today will be the norm long term. To answer the question above, in a nutshell, yes, it is a good thing that the Rate did not increase but we must be aware of the long term consequences if we don’t stay vigilant with our pending/savings patterns.

  • How to prepare for the Spring Market?

Winter will soon be over, and we have some nice weather to look forward too! Spring is one of the busiest times of the year as most people want to be out and enjoy the nice weather. The Spring historically has the busiest Real Estate Market as well. Preparations for listings and potential buyers ramps up. As you’ve heard from the recent news, Real Estate professionals believe we may have hit the floor on real estate prices. There was a very small tick upwards in the home prices with this past TRREB Report and it has people slightly optimistic about the market. We’re seeing multiple offers and bidding wars with recent transactions and it has us wondering because this defies all logic given the current Interest Rate landscape. One of the main factors to this is supply, there aren’t enough listings to keep up with the potential buyers on the market. The lack of inventory is maintaining market pricing which is keeping the market slightly higher than pre-pandemic levels. What do we do to better prepare for a potential purchase? The number 1 advice I can provide is making sure your pre-approved and knowing what your price points are. Staying on budget and not over extending yourself is very important, especially with affordability issues being present in day to day life.

  • What do I need for my Pre-Approval?

As mentioned above, getting your Pre-Approval and knowing what you can afford is a very important step.  It prepares you for what to expect and assists in painting a full picture of your financial outlook and budget requirements. Once your Pre-Approved, it provides you the client and the realtor a sense of relief and comfort moving to the next step. Items that will be required for your Pre-Approval are straight forward. You will want to prepare your documents in advance and provide them to us as part of the lenders requirements and conditions of your approval. The documents generally required are Proof of Income Documents (Job Letter, Recent Pay Stubs, T4 Statements and CRA Notice of Assessments).

  • Working with a Professional Realtor who understanding the Current Market?

Working with a professional for arguably one of your most important transactions is very important. Hiring and working with someone who understands the current market and who will understand the seller motifs and triggers is extremely beneficial. A professional who has a track record and successful negotiating strategy. They will navigate you through the market and not pressure you to purchase unless they know it’s the right fit for you. If you need help finding the right realtor, we only work with the best and would love to refer one for you!

  • Preparing for my Purchase?

Small details within your offer go along way. Specific strategies such as having your deposit ready and also increasing your initial deposit represents a lesser risk to the seller and proves that you are serious and less likely to walk away. Shortening your COF (Condition of Finance) to 2 Days or even firm. If your financing is in order, going in firm might be another option/strategy that will put you ahead of other offers. Having a flexible closing date might be beneficial to the seller and could be a main factor for choosing you. Bottom line is preparing a plan of attack with your realtor and sticking to it!