Canadian Interest Rates & Why You Should Sell Your Home Now

Posted by Ed Machart on Friday, January 29th, 2021 at 10:53am.

A very small portion of the population is able to pay cash for a home purchase. Most people need to take out a mortgage to purchase a home. Small changes in interest rates can make a big difference in how much interest is paid over the lifetime of the mortgage. Join me as I explore what the interest rates are doing since COVID-19 hit and why you should sell now, during a pandemic.

Interest Rates in Canada

The Bank of Canada slashed its benchmark interest rate to help stimulate the economy. And even though the Bank of Canada doesn’t set all mortgage rates, they do have some impact on rates overall.

The Bank of Canada uses interest rates to control the economy. When the economy is strong, they may raise the rate to keep inflation from rising above their target. Likewise, when the economy is weak, they may lower their policy rate to keep inflation from falling below target.

Changes in the policy interest rate lead to similar changes in short-term interest rates. These include the prime rate, which is used by the banks as a basis for pricing variable-rate mortgages. A policy-rate change can also affect long-term interest rates, especially if people expect that change to be long-lasting.

The Bank of Canada has said that it will hold the policy interest rate at 0.25% until the economy recovers and inflation reaches a consistent 2%. As you can see by this infographic from ratehub.ca, the rates for the most popular 5-year mortgage are the lowest they’ve been since before 2006. 

The Current Saskatoon Real Estate Market

While many of us questioned at first whether or not it would be possible to sell your home during a pandemic, it turns out it's only added fuel to the fire, and many homeowners are doing just that! With sales in Saskatoon up 35% over December 2019, up 32.1% above the 5-year average, and 33.5% above the 10-year average, you could say the market is surprisingly strong.

Inventory in Saskatoon during the month of December 2020 stood at 3.7 months, which is 43.7% below the level last year and 47.7% below the 5-year average, while the sales-to-listing ratio was 79.0%, suggesting a seller’s market.

Homes in Saskatoon stayed on the market an average of 48 days in December, down 26.2% from 65 days last year, below the 5-year average of 55 days and below the 10-year average of 52 days.

Selling Your Home During a Pandemic

The pace of activity doesn’t mean everything is going to always be business as usual. The process of selling a home will be somewhat altered by the current conditions. But that doesn’t mean selling your home during a pandemic is out of the question. Regardless of circumstances, there are definitely still advantages to selling your home in a pandemic. For one, statistics show that home prices could still be rising. 

Before selling your house during a pandemic, you should take into account you should take into account your own health and the health of your loved ones. If anyone in your household is at high-risk category for contracting the virus, inviting visitors or outside service providers is likely not the best idea. 

The current state of your income and employment is also important to consider, especially if you plan to buy a new home. If you've lost your job or your salary has been lowered because of the pandemic, it could significantly set back your ability to get a mortgage

With physical showings more regulated during a pandemic, you will want your listing’s photos, videos, and other digital assets to be as strong as they can be. To get the most out of your sale right now, sellers should de-clutter so that photography and virtual tours can be maximized.

 

Before listing your home during a pandemic, it is of the utmost importance to consider your health, your priorities, your financial outlook, and the overall risks and rewards you expect to see. And if you're still not sure which path to take, contact me today and I can help you make an informed decision!

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