Here are some insightful thoughts and predictions 🤞 from Mortgage Agent Steve Roode on what 2021 might hold...
The Bank of Canada will leave the overnight lending rate unchanged for the entire year
As the COVID-19 vaccine rolls out across the county, it will still take time to translate into a full economic recovery. As a result, The Bank will be “patient” in raising rates until pre-pandemic economic indicators are achieved. Therefore, the prime lending rate for variable-rate mortgages and HELOCs will remain unchanged.
Real estate prices (other than condos) will appreciate by 4 to 7%
A housing segment that’s shown no signs of slowing down in 2020 is detached homes, and this momentum is expected to continue into the new year, with the strongest growth in the suburbs around major urban centres. As such, we can expect that real estate prices, for all housing types other than condos, will appreciate between 4 to 7% (with Canadians working from home, the demand will continue to be strong for more space. Larger homes outside of the city centre will see the strongest demand).
Condo prices in downtown urban centres will fall in the first half of the year
As more university students learn remotely, the lack of immigration and the crackdown on Airbnb will all continue to weigh on condo prices in downtown urban centres in the first half of the year before stabilizing in the second half of 2021. When students return to campus and borders reopen for new Canadians, demand will return to the condo market. With home values surging, condominiums will be the only option for priced out first-time homebuyers. This prediction is in line with forecasts from other Canadian economists, with RBC Senior Economist Robert Hogue saying he expects condo prices to weaken in larger markets next year.
Fixed rates will be modestly higher at the end of 2021
As the vaccine rolls out across the country and there is optimism that the worst of the pandemic is behind us, Canadians can expect bond yields to rise which will cause mortgage providers to modestly increase fixed rates, particularly at the end of 2021. This comes as mortgage rates in the country remain low as a result of the Bank of Canada dropping its overnight rate amid the COVID-19 economic downturn.
There will be no new mortgage regulation introduced in 2021
Finally, as the government and regulators focus on the pandemic recovery, they will likely not introduce any new rules which would make it any harder for homebuyers to qualify for a mortgage — meaning that 2021 might be the perfect time to refinance your home or apply for a mortgage.
While predictions such as these help paint an optimistic outlook for what’s to come, just like the pandemic, the Canadian housing market remains largely unpredictable, and only time will tell how the year will actually pan out.