As Canadian mortgage interest rates continue to fall, landlords around the country are presented with a major opportunity for expanding the scope of their real estate investments. Bond yields have been falling steadily over the last few months, leading to fixed rate mortgages steadily decreasing. While this news is being looked at by some in the Canadian financial sphere as a bad omen for the economy, it’s being viewed as an overall positive by Canadian real estate investors.
Cost of borrowing falling in Canada and the US
Since late 2018, fixed mortgage rates have been steadily falling, with decreasing yields on five year bonds making it cheaper for banks and lenders to borrow on the bond market. The declining bond yield rates are a sign that stock market investors and bond market investors have different outlooks on where the Canadian economy currently sits, and different viewpoints on where it might be headed. While this can be seen by some as a bad sign for where the Canadian economy may be headed in the future, real estate investors are looking at it as a major opportunity to invest while the cost of financing loans is low.
In addition to fixed mortgage rates declining, variable rates also seem to be experiencing a similar trend. Rather than follow trends set by the bond market, variable mortgage rates take a cue from the Bank of Canada. Real estate investors are predicting that the Bank of Canada will be lowering rates, with some experts saying that this may help to fuel economic growth. This potential shift by the central bank has caused variable rates to lower along with fixed mortgage rates in many cases.
What this means for Canadian real estate investors
With the cost of borrowing on the decline, many Canadian real estate investors are seeing this as a prime opportunity to expand their investments by purchasing another rental property. Spring time has historically been one of the most competitive seasons for the real estate and mortgage markets, with investors looking to expand their horizons and lenders offering competitive rates where possible. A lower cost of borrowing also signals a great opportunity for investors who have been waiting for the perfect time to jump into the market, making it possible to invest in a more competitive market at one of the busiest times of the year for investors.
Investors looking to purchase additional rental properties or first time investors should look towards the falling cost of borrowing and seize the opportunity before mortgage rates rise again. This is especially true for investors looking to compete in the rental market, rather than attempt to compete in the less stable AirBnB and home sharing market. Some Toronto suburbs are considering passing stricter regulations (similar to what condos currently have) towards the short-term rental market, making it more of a risk for investors than long-term rentals.
The return of a potential renter’s market
With new measures for first-time buyers being included in the federal budget and falling interest rates, the return of a renter’s market may not be far away. This means landlords need to ensure that they’re adhering to the Residential Tenancies Act in order to stay competitive and come out looking more attractive that landlords who are currently subverting regulations and taking advantage of the market. The potential return of a renter’s market means that landlords are going to need to be prepared for thorough screening of tenants, and be familiar with the rules and regulations set by the Landlord and Tenant Board.
Property management firms like Highgate Properties can help you prepare for the return of a renter’s market by advising you on the best rates for your property, effectively screening tenants, and taking care of day-to-day landlord duties so that you can make time for more important things in your busy life. For more information about the property management and realty services offered by the experienced team at Highgate Properties, contact us today.