The federal government has relaxed some mortgage rules for first-time homebuyers to make it easier for them to qualify for and afford payments on their first home purchase. Specifically, they extended the amortization period from 25 to 30 years (the new rules take effect December 15). The average London home ($623,000), with a 10 per cent down payment and a five per cent interest rate would have a payment of about $3,261 with a 25-year amortization. The payment drops to $2,992 if the amortization is pushed out to 30 years. Therefore, a first-time homebuyer reduces their payments by about $270 per month by reducing the mortgage principal repayment.
Inflation in August fell to two per cent, the dream target for the Bank of Canada (BoC). It has accomplished its goal of taming inflation by slowing the economy, slowing wage growth and increasing the number of unemployed Canadians. The path is clear for the BoC to continue rate cuts at their upcoming meetings. What isn’t clear is if the conditions in the economy are bad enough to warrant “jumbo” rate cuts ― half-point reductions rather than quarter-point reductions.
Historically, big rate cuts have come at a time when the economy was in much worse shape and when employment levels exceeded 10 per cent (they’re currently still under seven per cent Canada-wide). If we see aggressive rate cuts, it could mean the BoC believes the economy is much worse off than we know. The real estate market has been telling us for 18 months that there’s a loss of confidence in the future, as demand has been weak despite falling mortgage rates, stable prices and an enormous supply of listings (a buyer’s market).
The changes in our real estate market are likely to be slow and gradual, as opposed to our recent experience during the pandemic. Prices should remain stable as variable mortgage rates are moving down slowly and fixed mortgage rates may decline at an even slower pace. There is five months worth of inventory to be absorbed, with many more listings hitting the market daily. We should not assume “pent-up demand” will start a rush of transactions, given tighter lending rules from mortgage providers and appraisers continuing their conservative valuations.
As a buyer, it’s a great time to take a measured approach to your planned purchase. As a seller, with the slowing economy, be careful to assume price growth will save you in the near future. The weakness in the economy suggests you should be prudent and recognize your property is worth what someone is willing to pay for it. Start talking to a mortgage broker today, even if your plans are years out ― they can help prep your financial picture to be best positioned when you’re ready to make a purchase. As for realtors ― their advice is free and they can provide local and regional perspective, making sure your assumptions are sound, and you consider all options available.
Market analysis provided by Marcus Plowright, Sales Representative, A Team London. Marcus can be reached at 519-872-8326 or marcus@ateamlondon.ca.
High- and low-priced real estate listings around town this week
London East
Low
Address: 478 Quebec Street
MLS number: X9347295
List price: $349,900
Days on market: 5
Size: 3 bedroom, 1 bathroom
Listing agent: Ty Giles, Broker, Saker Realty Corporation
High
Address: 129 John Street
MLS number: X9234740
List price: $5,595,000
Days on market: 47
Size: 9 bedrooms, 19 bathrooms, 5,000+ square feet
Listing agent: Trent Forristal, Salesperson, Sutton Group – Select Realty, Brokerage
London North
Low
Address: 28 Ranchwood Crescent
MLS number: X9271718
List price: $449,900
Days on market: 21
Size: 4 bedroom, 3 bathroom
Listing agent: Patrick Lexima, Sales Representative, One Percent Realty Ltd.
High
Address: 864 Clearview Avenue
MLS number: X9298104
List price: $4,675,000
Days on market: 13
Size: 5 bedrooms, 6 bathrooms, 5,000-plus square feet
Listing agent: Michael Reis, Sales Representative, Sotheby’s International Realty Canada
London South & West
Low
Address: 507 Osgoode Drive
MLS number: X9303040
List price: $369,900
Days on market: 12
Size: 3 bedroom, 2 bathroom
Listing agent: Vinay Third, Sales Representative, Re/Max Realty Specialists Inc.
High
Address: 1011 Cherrygrove Drive
MLS number: X9053822
List price: $4,250,000
Days on market: 55
Size: 4 bedrooms, 4 bathrooms, 5,000-plus square feet
Listing agent: James Smith, Sales Representative, Sutton Group – Select Realty
Disclaimer: London Inc. does not guarantee the accuracy of the statistical data on this page. The data does not represent the listings of any one agent or agency but represents the activity of the real estate community in the area. Any real estate agent’s ad appearing is separate from the statistical data provided, which is in no way a part of their advertisement.
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