Would it be smarter to buy a home now?

Or wait and perhaps buy a smaller or less attractive home later this year?

In early March, the governor of the Bank of Canada Tiff Macklem confirmed that for now, interest rates will not be going up. This is the first time a statement like that has been made in a year*.

That means the prime rate which is the rate at which your bank can borrow money to lend to you is 4.5%.

In the USA, its currently 4.75% and some investors are saying that it could go up to 5.5% by June 2023. This would happen because inflation is climbing in the USA.

A gap this big could devalue the Loonie against the US dollar, at which point the Bank of Canada may need to increase interest rates to encourage continued interest from investors who may wish to purchase blocks of Canadian dollars. If the Loonie devalues, your grocery items, many of which come from the states will also go up.

If interest rates go up, your borrowing ability goes down.

If your interest rate goes up by 1% that’s a reduction of 10% in spending power to get a home. In other words, if you are qualified to buy a $400,000 home today. A 1% interest rate increase will mean you can only spend $360,000.

* CBC Source Article

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