With the prime rate now at 5.2%, we reached out to Anita Springate-Renaud, Owner and Broker of Record at Engel & Völkers Toronto Central, for her insights on the real estate market. Over her 28-year career, Anita has guided numerous high-net-worth clients through various market conditions. Drawing from her extensive experience, Anita offered valuable perspectives on how the current rate shift might impact the market. Here’s Part One of our two-part Question & Answer series.
Q: How do shifts in interest rates typically impact home prices and market activity?
Shifts in interest rates have a direct impact on home prices and market activity, influencing both buyer demand and seller behaviour. Here’s how:
When interest rates decrease, we see three effects:
- Increased Buyer Demand: Lower borrowing costs make mortgages more affordable, encouraging more buyers to enter the market.
- Higher Home Prices: With more competition among buyers, home prices often rise due to increased demand.
- Faster Sales: Properties tend to sell more quickly as buyers act before rates climb again.
When interest rates increase, we see the opposite:
- Reduced Affordability: Higher mortgage payments discourage some buyers, leading to decreased demand.
- Slower Market Activity: Homes may take longer to sell, and sellers may need to adjust their pricing expectations.
- Potential Price Adjustments: If demand slows significantly, prices may stabilize or decline, especially in higher-priced markets.
Q: What trends are you seeing in your local market?
Currently, with rates at 5.2% and trending downward, we’re seeing renewed buyer interest in Toronto and the GTA. Many who were on the sidelines due to high borrowing costs are now entering the market, leading to increased activity. This could result in more competition and upward pressure on prices, particularly in high-demand neighborhoods.
However, inventory levels and seller expectations also play a role. If too many homes enter the market at once, it could balance out price increases. The key takeaway is that as rates drop, buyers are more willing to commit, which tends to heat up the market.
Q: When choosing between fixed and variable mortgages, what factors should buyers consider?
Variable mortgages can be an excellent option for homeowners when interest rates remain low, as they typically offer lower initial rates compared to fixed mortgages. Borrowers can take advantage of potential rate decreases, leading to lower monthly payments and overall interest savings over the life of the loan. However, because variable rates fluctuate based on market conditions, there is a level of uncertainty involved. If rates begin to rise, monthly payments can increase, potentially putting financial strain on homeowners who may not have budgeted for higher costs.
On the other hand, fixed-rate mortgages provide stability and predictability, making them a better choice for individuals with a lower tolerance for financial uncertainty. With a fixed rate, borrowers lock in their interest rate for the entire term of the loan, ensuring consistent monthly payments regardless of market fluctuations. This can be particularly beneficial in a rising rate environment, as it protects homeowners from unexpected increases in borrowing costs.
Ultimately, the choice between a variable and fixed mortgage depends on an individual’s financial situation, risk tolerance, and ability to adapt to potential rate changes. Those comfortable with some level of risk and seeking potential savings may prefer a variable mortgage, while those prioritizing stability and peace of mind may find a fixed-rate mortgage to be the better option.
Q: Where is the real estate market headed in 2025?
The real estate market in 2025 will largely depend on interest rates, economic conditions, and inventory levels. As rates are trending downward, there is optimism that lower borrowing costs will bring more buyers back into the market. However, the pace of market recovery will depend on how quickly rates decrease and whether inflation remains under control.
Key Predictions for 2025:
1. Increased Buyer Activity (If Rates Continue to Drop)
- Lower mortgage rates will make homeownership more affordable, bringing more buyers into the market.
- This could create more competition, especially in sought-after neighbourhoods.
2. Moderate Price Growth
- If demand picks up and inventory remains low, we could see home prices rise modestly in 2025.
- However, if more sellers enter the market, prices could stabilize rather than surge.
3. Potential Market Slowdown Before Full Recovery
- If economic uncertainty continues, buyers may still be hesitant despite lower rates.
- A full recovery may take time, possibly by mid-to-late 2025, depending on how the Bank of Canada adjusts rates.
4. Stronger Spring and Summer Market
- Historically, real estate activity picks up in the spring. If rates continue to decline in early 2025, we can expect a busier market by spring and summer, with more transactions happening.
Q: When might we see a recovery?
If rates drop steadily, market activity should increase by mid-2025. A full recovery could take longer, possibly into late 2025 or early 2026, depending on economic conditions and government policies affecting real estate.
Bottom Line:
The 2025 market will likely see gradual improvement, with lower interest rates encouraging more buyers. However, the pace of recovery will depend on economic stability, inventory levels, and buyer confidence.
Conclusion
A big thank you to Anita Springate-Renaud for sharing her valuable insights on the current real estate market. Stay tuned for next week, where Anita will provide her forecast for the Canadian housing market over the next five years, including whether now is the right time to buy. Don’t forget to subscribe to our newsletter for the latest updates.
If you’re looking to buy or sell your home in the Toronto/GTA, be sure to connect with Anita at Engel & Völkers Toronto Central, Brokerage.
About Anita Springate-Renaud
As a third-generation real estate professional with over 25 years of experience, Anita has built a thriving business grounded in her extensive market knowledge and unwavering dedication to her clients.
As the Owner and Broker of Record for Engel & Völkers Toronto Central with shops throughout Ontario, Anita and her team specialize in residential and commercial properties, condominiums, and new developments. She has been pivotal in helping clients achieve their real estate objectives by leveraging the world-class marketing tools and technology platforms that define Engel & Völkers’ service in over 35 countries.
Recognized with numerous awards, Anita holds prestigious designations, including membership in the Professional Athlete Advisory and Private Office—exclusive groups within the Engel & Völkers network with fewer than 300 members worldwide who serve high-net-worth clients and family offices managing premium real estate assets globally.
