Anticipation of lower rates drives increase in pre-approvals
The Bank of Canada's decision to hold the overnight rate steady at 5% is sparking a surge in demand among homebuyers in the Greater Toronto Area (GTA) as noted by LowestRates.ca mortgage expert Leah Zlatkin.
The BoC’s decision comes on the heels of the January Consumer Price Index (CPI) report, which indicated a 2.9% inflation rate with a surprisingly strong labour market and GDP data. This strategic pause is setting the stage for a potentially heated market in the coming months.
"Despite the Bank of Canada's decision to keep the rate stable, we're witnessing a surge in demand within the GTA housing market. This is largely driven by the consumer expectation that interest rates will soon decrease, prompting a significant increase in the number of pre-approvals we're processing. Buyers are eager to secure homes now, anticipating that competition will escalate as interest rates start to fall,” Zlatkin said.
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She predicts that this trend will continue in the GTA, potentially leading to a market dynamic similar to the early 2022 frenzy, characterized by bidding wars and buyers skipping home inspections to secure properties.
"The market is shifting back to favour sellers, with intense competition reminiscent of the hot market conditions observed in early 2022," Zlatkin said.
Regarding mortgage preferences, Zlatkin highlighted a growing popularity for shorter-term mortgages. Many consumers are opting for these, believing they can renew their mortgages at lower rates in the near future.
"There's also some interest in variable rate mortgages, though the current discounts from prime—around prime minus 0.9%—are not particularly appealing. With fixed rates remaining in the high fives, opting for a variable rate mortgage is less advantageous in the current financial landscape," Zlatkin said.
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