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Should I buy a home now or wait for interest rates to fall?

If you are asking yourself this, you’re not alone. Fixed mortgage rates peaked last fall and many Canadians are now carefully monitoring the cost of borrowing in hopes of more favourable interest rates. Simultaneously, the benchmark price of homes has stabilized and is reported higher in January 2024 versus the same time last year, according to the Greater Vancouver Realtors.

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(The Greater Vancouver Realtors—or GVR—says benchmark prices reflect the quantitative features of typical homes—the square footage of the above-ground living area, for instance—as well as qualitative features such as proximity to things like shops and schools. Together, these become the ‘benchmark’ for properties in a given area, be they townhomes, apartments or detached residences.)

Real estate has historically been a solid investment, with properties often appreciating over time. While there are no guarantees, buying a home now could mean getting in before prices rise further. As demand for housing outstrips supply in many areas, purchasing a home today could lead to significant long-term gains.

To better understand this and help you make a more informed homebuying decision, let’s peer in the rear-view mirror and examine the financial outcomes for those who could have purchased a home in December 2019 rather than waiting a year. (Benchmark pricing obtained from the GVR.)

Buy now

Purchase Date: December 2019

Benchmark price for a townhouse: $778,400

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Five-year fixed rate, with a 25-year amortization: 3.09 per cent

Opening mortgage balance, with a 20-per-cent down payment: $622,720

Mortgage balance in December 2024: $533,134

Buy later

Purchase date: December 2020

Benchmark price for a townhouse: $813,900

Five-year fixed rate, with a 25-year amortization: 1.82 per cent

Opening mortgage balance, with a 20-per cent down payment: $651,120

Mortgage balance in December 2024: $552,030

Assuming the borrowers qualified to buy in 2019, even at a higher interest rate, they would enjoy a lower mortgage balance five years later than if they had waited a year. They also enter the homeownership stage 12 months sooner. After all, buying a home offers stability and control over one’s living situation, while renters are at the mercy of landlords and the rental market, with little control over rent increases or changes to lease terms.

Homeownership provides the security of knowing that monthly housing costs are stable and predictable.

To further explore this, I examined the period of December 2013 to December 2019 and the outcome is resoundingly similar. It was more favourable to have bought a year earlier in 2013—even at a higher rate—than to wait 12 months when rates were lower.

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Buy now

Purchase date: December 2013

Benchmark price for a townhouse: $456,100

Five-year fixed rate, with a 25-year amortization: 3.59 per cent

Opening mortgage balance, with a 20-per-cent down payment: $364,880

Mortgage balance in December 2018: $315,335

Buy later

Purchase date: December 2014

Benchmark price for a townhouse: $476,800

Five-year fixed rate with a 25-year amortization: 3.04 per cent

Opening mortgage balance with a 20-per-cent down payment: $381,440

Mortgage balance in December 2019: $337,991

The Canadian Real Estate Association, the B.C. Real Estate Association and RBC have all forecast higher real estate sales volumes and higher benchmark prices for 2024 and beyond. This begs the question: What are you waiting for? If you qualify to purchase a home, it may be in your best interest to make an offer to purchase sooner rather than later.

As well, the GVR indicators suggest we could be back in a sellers’ market this spring. If this does happen, we may expect multi-offer situations on some homes in sought-after communities.

Owning a home is a significant milestone for many individuals, representing stability, security and a sense of accomplishment. If you are contemplating a journey into the real estate market, a mortgage specialist can help you better understand your path to homeownership, ensuring you and your family are ready to confidently make the move.

Randy Chin
RBC Regional Manager, Residential Mortgages
Follow Randy on X and Instagram @rbcrandychin

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