Riding the trend that began in 2015, mortgage rates continued to fall in the first quarter of 2016, dropping below the 2% mark on average. These healthy rates offer good opportunities and encourage purchasing intentions, especially in conjunction with the drop in property prices observed last year and the extension of government aid measures. However, should you take out a loan right away, or wait for more competitive rates next fall?
Rates are tightening
Borrowing rates have been breaking records for the past year. After a historic low last summer and a slight increase at the end of 2015, they are continuing their downward curve at the beginning of 2016, with no way of predicting where they will stop. And experts are already calling it “unprecedented” and “record-breaking” almost every month.
In April 2016, it is possible to borrow on average (for good files):
- Around 1.6 over 10 years
- Around 2.1% over 20 years
Rates that can still go down by several points for excellent files. In short, borrowing has never cost so little, which favors real estate investment projects. It is possible to borrow more, for longer, and for less.
The other consequence is the desire of borrowers already committed to renegotiating their credit: for those who took out a mortgage two years ago, the difference between the rates at the time and the current rates can reach more than 2 points!
Is it time to buy?
Thanks to these exceptionally attractive interest rates, the real estate market has been unstuck. Many buyers have taken advantage of this good economic situation to finalize their project. When it comes to buying real estate, the question of purchasing power becomes essential; and with such low rates, an individual can borrow 25% more than six years ago, for the same duration and monthly payments. Enough to provide the opportunity to invest in a more interesting home.
However, it may be better to wait and not rush. It would be a shame to borrow today at 2.1% and miss out on a further significant decline in the coming months.
However, for many players in the sector, after a year in 2016 of continued rate declines and a gradual increase in the volume of transactions. Borrowing rates should indeed remain low for the next 6 months, before a possible stabilization (or increase). This means that the next school year should be the ideal time to acquire a property.
Be careful, however, because a too-rapid recovery of the market would have consequences on interest rates. The more people buy, the more prices rise, it’s mathematical. So you shouldn’t wait too long to get started if you are maturing a real estate investment project: by the end of 2016, it could be too late.
Entrust your project to a property hunter to earn even more
In any case, you have to negotiate again and again with banks or lending institutions to obtain the most advantageous rate. Banks have every interest in keeping low rates, which attract potential borrowers and allow them to run their economy.
Once the ideal borrowing rate has been negotiated with the bank, significant savings are still possible. By using a professional agency, you can still obtain significant discounts on the real price of the property, which will lower the total cost. Indeed, if you entrust your project to a property hunter, he will not only find you the property of your dreams; he will also use all his know-how to get you the best purchase price. Much better than if you had negotiated on your own.
So, between historically low borrowing rates, good prospects for the next school year, and the possibility of entrusting the reins of your project to a property hunter, 2016 should be the year when you invest in property!
