Advice for Selling Your Home – 5 Tips

Advice for Selling Your Home – 5 Tips

June 14, 2024

With recent interest rate cuts, homeowners can potentially save significantly on their mortgages. This is great news for sellers, as lower rates can attract more buyers into the market. Here’s an in-depth look at how you can take advantage of these market conditions to sell your home successfully.

Understanding the Rate Cut

On June 5th, the Bank of Canada reduced its key overnight lending rate by 25 basis points, bringing it down to 4.75%. This move marked the first rate cut since March 2020, ending a period of rigorous monetary policy tightening. According to experts, we are now in the fourth phase of the pandemic rate policy. This phase aims to transition to a less restrictive rate environment, which is beneficial for borrowers and, consequently, for home sellers.

Variable-Rate Mortgages Explained

A variable-rate mortgage has an interest rate that changes based on the prime rate set by banks. This type of mortgage offers flexibility and the potential for savings if rates decrease. For example, if you have a variable-rate mortgage at prime minus 0.5%, and the current prime rate is 4.0%, your mortgage rate will be 3.5%. When rates drop, so do your payments, making it easier for buyers to afford homes.

How Rate Fluctuations Affect Mortgage Payments

Experts calculated the average monthly mortgage payment on a 5-year variable mortgage following the rate cut, using benchmark prices from the Canadian Real Estate Association. For instance, in Toronto, monthly payments are projected to decrease by approximately $155, resulting in annual savings of around $1,860. In Vancouver, the savings are even more significant, with an average monthly change of $166.20, leading to over $1,994 in annual savings.

The Impact on the Housing Market

High borrowing costs have been a major deterrent for both buyers and sellers. A 2024 survey found that 51% of non-homeowners cited high home prices as the main barrier to purchasing a home. However, with lower lending rates, the real estate market is poised for significant changes. Lower rates are expected to bring more buyers into the market, increasing sales activity and potentially driving up home prices.

Key Advice for Selling Your Home

  1. Highlight Affordability: Emphasize how lower interest rates make your home more affordable to potential buyers.
  2. Price Competitively: With more buyers entering the market, a well-priced home can attract multiple offers.
  3. Enhance Curb Appeal: First impressions matter. Ensure your home’s exterior is inviting.
  4. Stage Your Home: A well-staged home can help buyers envision themselves living there.
  5. Market Aggressively: Use online listings, social media, and open houses to reach a wider audience.

Taking advantage of lower interest rates can significantly impact your ability to sell your home quickly and at a desirable price. By understanding market conditions, pricing your home competitively, and ensuring it’s presented in the best possible light, you can attract more buyers and maximize your profits.