It’s never been a better time to be a homebuyer with fixed mortgage rates setting record lows. The rates we’re seeing now are even lower than they were during the financial crisis over a decade ago. As rates drop, the positive impact on the homebuying budget grows stronger. Although most of the economic consequences of COVID-19 have been negative, these low rates may offer some positive news – homebuyers are now able to expand their horizons (and their square footage!) in their home shopping.
What does this mean for your purchasing power? We connected with Mujtaba Syed, Lead Mortgage Planner at Syed Mortgages to help break it down:
The average home sales price in Alberta is $376,600. In January 2019, the 5-year fixed rate was 3.20% which would result in a mortgage payment of $1,799.26 per month.
Now, let’s compare that same home price of $376,600 using today’s 5-year fixed rate of 1.44% and your monthly payment drops to $1,476.87 – that’s a savings of $322.39 per month.
That’s either more money in your pocket if you shop at that same price point, or if you know your monthly housing budget is $1,800 per month, you can now shop for homes at a higher price point. Add in the increased number of people working from home and we’re seeing more buyers wanting, and now able, to shift their purchase focus from high-density condos to low-rise and single-detached homes. These savings also make homeownership a reality for many renters with low rates driving a monthly payment that may be equal to the cost of rent.
It’s also become easier to qualify for mortgages over the past several months. The big banks have been cutting their posted mortgage rates (from 5.34% to 4.79%) used in determining the mortgage stress test benchmark rate.
What is the mortgage stress test? It’s a way of testing how you and your finances might be affected by a sudden bout of financial turmoil. When it comes to mortgages, it’s how you, as the potential homeowner, would cope with your mortgage payments in the event that your interest rate rises or you suffer a financial emergency of similar circumstances. All potential homeowners need to prove they can afford their potential mortgages based on their lender’s minimum “qualifying rate.”
With historically low rates and the drop in the qualifying rate for the stress test, it couldn’t be a better time to buy a home – you can lock in at an ultra-low rate and know exactly what your mortgage payment and rate will be for the years to come.
Brookfield Residential Edmonton proudly crafts award-winning homes for every stage of life in great communities. With thoughtful designs in both our communities and our homes, we create places for people to belong. Connect with our sales team and let us help you find the best place to call home.