Lower rates doing nothing for up-sizing clients

by Olivia D'Orazio26 Jan 2015
Lower interest rates – announced by the Bank of Canada last week – will mostly benefit first-time home buyers, not the average up-sizing clients, say agents.
 
“Getting into the market is quite affordable with mortgage rates today,” says Ira Jelinek, an agent with Harvey Kalles in Toronto. “It’s better for first-time buyers to take that plunge now. You never win trying to time the market.”
 
Many of those prospective buyers entering the market for the first time will look toward condos for their inaugural property purchase – a move that Elli Davis, an agent with Royal LePage, says is aided by the BoC’s rate cut.
 
“The lower rates will enable people who might not have been able to afford a mortgage before,” she says. “They’ll be able to go do that instead of rent.”
 
However, the lower rates will offer a different story to homeowners who are already in condos and are hoping to finally make the jump into a detached single-family home.
 
“It’s two steps forward, one step back,” Jelinek says. “It’s going to bring in more buyers, but it will also drive up the prices.”
 
Indeed, the price gap between condos and detached single-family homes in the city will likely widen, especially considering the continued lack of available listings in some of Canada’s larger cities.
 
“A lot of people who predicted prices going down were wrong,” Davis says. “Prices don’t seem to be going lower.”
 
But Davis says that, despite lower BoC rates, buyers aiming to move up the property ladder – namely those looking to shift from condo to single-family home – will continue to base that purchase on more internal factors.
 
“I think a condo versus a house is more of a lifestyle choice,” she says. “Some people don’t want the responsibility of a house. I think if you’re in a lower price range then you might just go the condo route. I think it’s really based on personal price range.”

COMMENTS

  • by EddieN 1/26/2015 10:35:55 AM

    Until the lower BoC rate translates into lower rates at the banks, nothing will happen. Even if the rates at the banks do drop, there is still no guarantee that the market will be affected. The current real estate prices are discouraging people from selling their property to move up. It is plainly unaffordable. So, the prices will become dormant or continue to slightly grow due to lack of inventory, regardless of the rate. The change in the rate will only encourage people to refinance their current mortgages or borrow money to fix up their existing property. What will be interesting to see is when people start dumping their properties when they can longer afford to maintain their lifestyle due to high level of taxation (property tax + income tax + sales tax) combined with the high cost of living and salaries not keeping up

  • by Jeff 1/26/2015 11:00:55 AM

    Ugh. When I clicked on this article in the email, the headline was "Lower rates set to benefit first-time buyers". It has since changed to the much more negative sounding "Lower rates doing nothing for up-sizing clients"... what's with you folks today?

  • by Marcella Kammerer Royal LePage State Realty 1/26/2015 12:11:34 PM

    Well, unfortunately it is not easy for first time homebuyer's or for those who want to buy up. The banking regulations makes it harder for anyone to purchase a home but easily lend money too freely to those who have over extended their credit. Banks are making their decisions for the wrong purpose. Its getting homeowner's in trouble and first time purchaser's can't get into the market. Rest assured, banks will always be making money.

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