For many Oakville, Burlington, Milton, Halton Hills and GTA residents, homes are becoming increasingly less affordable. While home prices have come down from the worrisome highs they reached in winter in 2017 (in the 905 region, detached home prices officially averaged $1 million before coming down to about $800-900,000 after the province and country rushed to cool the market), it’s still difficult to purchase a home in Halton.
In December, real estate brokerage Zoocasa said that Halton is officially ensconced in seller’s market territory.
But while buying a home won’t be easy for most buyers going forward, one financial institution is making borrowing a little easier–and more are expected to follow.
Recently, Royal Bank of Canada (RBC) lowered its posted five-year fixed rate from 3.89 per cent to 3.74 per cent.
Ratehub says it was the first time since October 2017 that Canada’s biggest bank has lowered its mortgage rate.
“What’s interesting about the move is that it’s an about-face in terms of how rates have been trending – upward,” says Ratehub in a blog entry posted to Zoocasa’s website. “The Bank of Canada has regularly increased its benchmark rate and mortgage rates have followed in lockstep.”
Over the past few years, Canada’s strong economy has prompted the Bank of Canada to steadily increase interest rates. While the increases were good news for the economy overall, they were an additional hardship for buyers who were already grappling with the newly-implemented OSFI stress test–a test that requires prospective buyers to qualify at higher rates than they’ll ultimately be paying.
The stress test was implemented by the federal government to cool the market and help Canadian buyers avoid excessive household debt (which makes sense at a time when 46 per cent of Canadians are $200 or less away from financial insolvency).
With the worldwide economy appearing a little less robust in early 2019, the Bank of Canada refrained from increasing interest rates.
Fortunately for anyone eyeing the market, homebuyers may be in for a bit of reprieve (for now) following RBC’s decision to slash its rate.
Ratehub also says other banks are likely to follow suit, making life a little easier for even more prospective buyers.
“RBC is the largest mortgage lender in Canada, so whenever they move their mortgage rates we can expect that the other four banks will follow suit. We anticipate that the other big banks will soon have a publicly posted rate of 3.74 per cent as well,” says James Laird, president of CanWise Financial.
“We have expected this move from lenders since bond yields dropped in December, after the Bank of Canada’s announcement stating that future rate hikes would be slower and less frequent. The most recent Bank announcement highlighted policymakers’ concerns with our energy and housing markets, which suggested to us that rates will be stable for a longer period of time than had previously been anticipated.”
So, how much will homebuyers save?
According to Ratehub.ca’s mortgage payment calculator, a homeowner with an $800,000 mortgage and five-year fixed rate of 3.89 per cent will have monthly mortgage payments of $4,161. Comparatively, a homeowner with a five-year fixed rate of 3.74 per cent would have monthly mortgage payments of $4,096.
That means that a 0.15 per cent difference in their mortgage rate would lower mortgage payments by $65 per month or $780 per year.
While $65 a month in savings is good, Ratehub says Canadians are still free to shop around for even lower rates. According to the company, the best mortgage rate in Ontario sits at 3.29 per cent for a five-year fixed rate.
“Canadians who need a mortgage this year should check back frequently with rate sites and mortgage providers. As the spring home buying market approaches many lenders will offer deep discounts and promotions in order to attract new customers,” Laird said. “Anyone looking for a variable rate should act quickly, because the current stable interest rate environment is causing lenders to reduce the discounts being offered on variable rate mortgages.”