Why Buying a Home Now Could Be Your Smartest Move... Before Interest Rates Drop Further
In today’s real estate market, one big question many prospective homebuyers are facing is: “Should I buy now or wait until the end of 2025?” With the Bank of Canada’s policy rate currently at a peak, there is a growing expectation that it may gradually decrease, potentially reaching around 2.75% by the end of 2025. While lower interest rates are often seen as favorable for homebuyers, there are compelling reasons to consider making your purchase sooner rather than later. Here’s why acting now, with today’s variable mortgage interest rate at 4.85%, could offer unique advantages.
Anticipated Price Increases as Rates Drop
Historically, when mortgage rates fall, housing demand surges. Lower interest rates reduce monthly mortgage payments, making homes more affordable and attractive to a larger pool of buyers. This increased demand, however, typically drives up home prices—sometimes significantly.
Over the past decade, the Greater Toronto Area (GTA) and other major markets in Canada have seen noticeable price spikes when mortgage rates drop. Waiting until 2025, when interest rates are expected to be lower, could mean facing a more competitive market and higher home prices. So while you may benefit from a lower rate, you may also end up paying a premium on the purchase price.
See How Much You Could Save Today!
Explore our Savings Chart to see the potential savings on five different purchase prices in today’s market. Whether you're buying your first home or upgrading to your dream property, these numbers show why now is the time to act.
Buy Now Savings Calculator
Buy Now | Buy Dec 2025 | Buy Now Price Savings | 5 year. Mortgage Interest Savings | Total Savings | % Savings |
$ 750,000 | $ 787,500 | $37,500 | $40,484 | $77,984 | 10.40% |
$1,000,000 | $1,050,000 | $50,000 | $45,230 | $95,230 | 9.52% |
$1,500,000 | $1,575,000 | $75,000 | $67,845 | $142,845 | 9.52% |
$2,000,000 | $2,100,000 | $100,000 | $90,461 | $190,461 | 9.52% |
$2,500,000 | $2,625,000 | $125,000 | $113,075 | $238,075 | 9.52% |
$3,000,000 | $3,150,000 | $150,000 | $135,690 | $285,690 | 9.52% |
2025 price increase based on a projected moderate price increase of 5% on 2024 average home prices.
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Locking in Equity Now
Buying now at the current price allows you to lock in the value of a property before the market potentially surges again. By purchasing in today’s market, you gain equity as home values appreciate in the coming years. This “equity boost” can offer financial security and potentially increase your wealth as your home appreciates.
If you wait, you may find yourself paying more for the same property, effectively reducing your equity gains over time. Acting now positions you to benefit from market appreciation rather than competing against it.
Flexible Mortgage Options to Benefit from Future Rate Drops
Although the variable mortgage rate is currently at 4.85%, opting for a variable-rate mortgage provides flexibility. With a variable rate, as the Bank of Canada lowers interest rates, your mortgage rate will likely decrease as well, reducing your monthly payments over time.
When the time is right, you can secure a fixed-rate term at a more favorable rate. This strategy will lock in your savings for the next five years.
This win win strategy allows you to buy your dream home before the potential price increases as the interest rates continue to drop and you can lock in your lower rate by converting to a fixed mortgage when the interest rates drop by another 1.5% as projected by December 2025.
Avoiding a Price Surge Driven by Renewed Demand
The anticipated rate decrease in 2025 could trigger a wave of buyers who have been waiting for more favorable borrowing conditions. This influx of demand is likely to drive competition, making it harder for buyers to find their ideal property at an affordable price. As we saw in previous periods of rate cuts, markets can become heated, leading to bidding wars and even higher prices.
Purchasing now, before the rush, gives you an advantage in a calmer market where you have more negotiating power and access to a wider selection of homes.
Stable Housing Costs in a Potentially Uncertain Economic Landscape
Buying a home now at the current 4.85% variable rate provides stability in your housing costs, helping you plan financially even in the face of economic uncertainties. Homeownership can shield you from the impact of potential inflation in rent prices, providing a sense of stability over the next few years.
Capitalize on Current Buyer Incentives
With the current real estate market adjusting to high interest rates, many sellers and developers are offering incentives such as reduced closing costs, home warranties, or even price reductions. By purchasing now, you may find more negotiating room and incentive opportunities that could disappear in a high-demand, lower-rate environment.
Conclusion: The Opportunity to Build Long-Term Wealth
Buying a home now offers you the dual advantage of locking in a purchase price and preparing for potential rate decreases. By starting your homeownership journey today, you’re positioning yourself to benefit from any future rate reductions without the associated market pressures and higher prices.
Making a move now allows you to build equity, secure a foothold in an appreciating market, and take advantage of current buyer incentives. In an uncertain market, homeownership can provide stability, financial growth, and long-term security. So, rather than waiting and risking higher prices, consider acting today to set yourself up for a brighter future in your new home.
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* 4.85% interest rates as at November 15, 2024