As we all know, the BC real estate market is in a unique position. In today’s in-depth article, we will cover what we are seeing from our existing clients, new clients and partners within the Vancouver real estate industry.

To start, variable-rate mortgage holders have been exploring their options.

These are widespread conversations ongoing, and we have been helping our clients come to terms with either staying the course with variable, converting into a fixed-rate mortgage, or opting for a full refinance where it makes sense. Mortgages are far from “one-size-fits-all,” so if you are currently in a variable mortgage and want to review your options, please don’t hesitate to reach out. 

Who is buying right now?

We are still seeing many active buyers regardless of inflated interest rates. Five the most common situations are outlined below:

1. Selling and buying in the same market: This situation ensures that market participants stay in the market and limits the risk of buying “too high” or selling “too low.” Selling and buying the same market will always be relative when it comes to price points. We have seen many buyers pushing to upsize, as we have witnessed detached homes drop in value far more than stratified properties over the last two years.
2. Rental purchases: Rental purchases are few and far between as of late, however, we have seen investors purchasing in out-of-town/ smaller markets where the rents are typically similar to the Lower Mainland, but the property values are much lower – this can create cash flow even with the increased interest rates being offered today.
3. Downsizing/moving out of town: We have seen an exodus from the Lower Mainland for well over a year. Affordability has become a challenge for many locals – driving them to other areas. Most commonly, we have seen people moving to Vancouver Island, The Okanagan and Alberta.
4. Multi-generational living: Families combining forces to purchase real estate is the hottest new trend. There are countless reasons this is happening, but typically, it consists of parent(s) ready to sell and go mortgage-free and kid(s) that might be stuck outside the market or simply cannot qualify/afford to move into something bigger. The ideal outcome is a combined purchase that houses all family members (often more than one dwelling on the property) with the parent(s) mortgage-free, the kid(s) taking advantage of the parent’s large down payment and covering the mortgage payment. 
5. First-time home buyers: Although rates have dramatically increased over the last two years, if the mortgage is affordable, many first-time home buyers are still pulling the trigger. Owning your own home still outweighs renting, and waiting for rates to drop could easily increase property values – a game that few will balance perfectly. 

The importance of a rate hold

Interest rates have been extremely volatile over the past two years. If you are pre-approved and shopping for a new home, you want to be certain there is a “worst-case scenario” rate held for you. Rates can be held for 120 days with various lenders and there is no downside to the borrower.  If rates increase, your mortgage qualification may drop.

Other uncommon scenarios are as follows:

• Renewals: Some say timing is everything, but one thing that is tough to time is the market when your mortgage is up for renewal. It is estimated that over $300 billion in mortgages are coming up for renewal in 2024 and again in the years ahead. Many of these borrowers will be experiencing an interest rate shock (especially those in a fixed-rate mortgage.) When you come up for renewal, you are essentially a “free agent in the mortgage world. You can re-amortize, switch lenders, switch products, consolidate debt, add A home equity line of credit (HELOC) etc. Unfortunately, many Canadians are unaware of this and simply renew with their current lender. This is a significant time to be in touch with us to discuss potential options. Many Canadians are looking for some relief, and a restructuring of your mortgage could be just that. 

• Second mortgage/HELOC: Second mortgage or private mortgage/HELOC products are mainly used to consolidate debt, extract equity or create a financial safety net. This is especially valuable if you have a cost-effective first mortgage currently in place.

• Buyout financing: This is certainly not tied to our market but something that is constantly in play and often needs to happen regardless of the market conditions. Buyout financing is most commonly seen for separations but is also used in partnership buyouts and estate buyouts. Buyout financing is utilized to buy another party out of a property by increasing the existing financing. Qualifications may not align in certain situations, or there might not be enough equity. In these situations, we often assist in pre-approving our clients based on a sale and purchase.

• Presale financing: Presale purchases are yet again difficult to time. Completion timelines are reliant on construction progress and Municipality approvals. When developments are ready for completion, buyers are often granted a 10-day notice and rarely will allow extensions without a cost. Anyone with an active contract on a presale should be planning for financing well before completion, even up to 6-8 months prior. Given the increased rates, your qualification has likely changed since the presale contract was written.