Housing Market 2022: what you need to know

The housing market can be a frightening battleground for buyers right now. With house prices dramatically rising in the last few years and the recent interest hike, purchasing a new home can be an overwhelming process, especially for new home buyers.

However, that doesn’t mean your dream house is out of reach. There are many ways to savvily lock in a reasonable mortgage rate and get yourself into your new home.

“As the official bank of the Canadian Defence Community, BMO is here to help military families make real financial progress. A mortgage specialist can help guide you through the homebuying process, build a plan and find the best solution for your unique situation,” said Omar Abouzaher, Regional Vice President of Ottawa East Market and Western Quebec for BMO.

Abouzaher shares some tips and tricks of the business to get you on your way to your closing date sooner than you think.

Five Fundamentals

There are five key fundamentals that Abouzaher recommends to home buyers when it comes to securing a reasonable mortgage rate. Whether you’re a first time home buyer or not, everyone can find something of benefit in these fundamentals:

• • Saving for downpayment: For starters, Abouzaher recommends that homebuyers start with saving for their downpayment, stating that it’s never too early or too late to start saving.
  • Federal programs: Once you have a solid downpayment amount in hand, Abouzaher recommends that new home buyers look into national government initiatives such as First-Time Home Buyers Plan or the Home Buyers Plan that allows you to withdraw funds from your RRSP to buy or build a home.
  • Going to a mortgage specialist: Using a trusted agent and mortgage specialist can help home buyers secure a reasonable mortgage rate. “Whether you’re looking for your first home, buying another property, or refinancing your mortgage, a specialist can make things a little easier and help you choose the mortgage that’s right for you,” stated Abouzaher.
  • Get pre-approved: “For homebuyers, getting pre-approved provides a cushion for due diligence when purchasing a home,” recommends Abouzaher. Banks can even have certain programs for military families for pre-approval. According to Abouzaher, BMO offers a 130-day rate guarantee that locks in the rate through a pre-approval. “BMOs 130-day mortgage rate guarantee is the longest rate guarantee of any major Canadian bank. This means that if rates go up, they’ll get to keep your original lower rate, and if they go down, we’ll honour the new lower rate.”
  • Build a budget: Build a budget including the new costs associated with purchasing a property, including potential reno purchase, etc. Speak with a mortgage specialist who can help guide you through the process.

Fixed or Variable Rate?

When looking to secure a mortgage rate, many home buyers question whether they should go with a fixed rate or a variable rate. But, according to Abouzaher, both have their advantages, depending on individual circumstances.

“It is important for customers to clearly understand the features of variable and fixed-rate mortgages to make an informed decision based on their needs and preferences,” noted the BMO Regional Vice President.

Currently, variable rates are lower than fixed rates, but that may be for the moment. Multiple rate hikes are expected this year which means those with a variable rate will see an increase in their rate while those with a fixed rate will not.

“Customer should consider their risk tolerance with regards to rate changes on variable rate mortgages and the interest rate differential between fixed and variable rates as part of their decision-making process,” said Abouzaher.

Housing Outlook

The Canadian Mortgage and Housing Corporation (CMHC) recently released its annual Housing Market Outlook – Spring 2022 report.

In the report, CMHC chief economist Bob Dugan states, “We expect the growth in prices, sales levels and housing starts to moderate from recent highs, but remain elevated in 2022. Improving levels of employment and immigration are expected to be key factors as the impact of pandemic restrictions continue to recede. 

“In 2023 and 2024, the growth in prices will trend closer to long-run averages with sales and starts activity expected to remain above 5- and 10-year averages. Price growth will likely continue to be led by markets with low listings, including Vancouver, Toronto, and Montreal.” 

Report Highlights 

CMHC report provides a forward-looking analysis of Canada’s housing market. The goal is to help anticipate the emerging trends in Canada’s new home, resale, and rental housing markets and the potential impacts of affordability and other challenges. 

Key highlights from the report include: 

• • CMHC expects the growth in prices, sales levels, and housing starts to moderate from recent highs but remain elevated in 2022. Robust GDP growth, higher employment, and net migration will support demand.
  • In 2023 and 2024, the growth in prices will moderate with sales and starts activity remaining above long-run averages. Home ownership affordability will decline with rising mortgage rates and with the growth in prices expected to outpace income growth. Rental affordability is also set to decline from increasing rental demand and low stocks of rental housing.
  • The Prairie provinces, led by Alberta, will likely see relatively strong sales and starts levels and be stimulated by energy sector investments and higher energy and commodities prices. The growth in prices is predicted to remain below the national average, reflecting more balanced supply conditions than in other regions.
  • Ontario, Quebec, and British Columbia will likely see the strongest price gains in 2022. This will largely reflect tighter supply constraints than in the rest of Canada. The growth in prices in these provinces is expected to slow by the end of 2024.
  • The Atlantic region will likely see continued upward pressure on housing activity and growth in prices from high inter-provincial migration. The level of home prices will remain relatively low in comparison to the overall Canadian average.

Assurance for Homebuyers

As a bank committed to supporting the military, BMO has plans and options to support military members through the process of purchasing a home. 

“BMO is here to help military families make real financial progress. A mortgage specialist can help guide you through the homebuying process, build a plan and find the best solution for your unique situation,” said Abouzaher.

To learn more about BMO’s specific programs, click here.