As we approach spring 2025, the current interest rate environment is setting the stage for what could be an exceptionally active real estate market. With Prime Rate and fixed rates trending downward, affordability is on the rise, increasing the mortgage qualification amounts and making homeownership more accessible than it has been in recent months. For prospective buyers, this combination of factors creates a rare window of opportunity—one that could soon narrow as more buyers re-enter the market and competition intensifies. Now may be the time to consider purchasing sooner rather than waiting for further rate declines.

And here’s why I think so…

In July 2023, Canada’s consumer Prime Rate peaked at 7.20% and remained at that level for nearly a year before finally beginning its descent in June 2024. Since then, it has dropped to today’s rate of 5.95%, and nearly every economist projects that Prime Rate could fall further, potentially reaching as low as 4.45% in the next 6-9 months. Meanwhile, fixed rates already began their descent several months ago, and they are also expected to continue declining, though at a more gradual pace, likely stabilizing somewhere in the low 4% range. What does this mean? Lower interest rates translate to higher mortgage qualification amounts and lower payments.

For example, twelve months ago, a combined annual income of $100,000 with a 5% down payment qualified for a $400,000 purchase with a $20,000 down payment. Today, that same $100,000 annual income qualifies you for a $450,000 property with a $22,500 down payment. Adding to this, real estate prices have stayed level or even decreased slightly, creating a dual affordability advantage. Lower rates, lower prices—this means more buying power, and at more affordable financing conditions.

And on December 11, 2024, a third boost to affordability is set to take effect: 30-year amortizations will become available for buyers with less than a 20% down payment, previously only accessible with a 20% down payment. This additional five-year amortization will increase purchasing power even higher, allowing buyers to qualify for larger mortgages. For the same $100,000 annual income, a 30-year amortization boosts maximum purchasing power from $450,000 to $475,000 with a down payment of $23,750. Monthly payments across these scenarios range from $2,450 twelve months ago to $2,350 after December 11 (based on a current interest rate of 4.44%).

With interest rates falling and fewer competitive buyers in the market (at the moment), now may be the ideal time for prospective buyers to take advantage of their purchasing power. Waiting for rates to drop further may feel tempting, but any minor savings on a mortgage could be easily overshadowed if/when property values surge like they typically do in a competitive spring market. For instance, if today’s fixed rate is 4.44% and you’re holding out for lower rates (which let’s say, drops to 4.19% by Spring 2025), any advantage gained from a marginally lower rate could be erased by spring price increases. While interest rates can be renegotiated or refinanced in the future, the purchase price of a property is locked in, making today’s subdued market conditions a rare opportunity to buy at a relative low.

Let’s say you purchase a property today for $500,000 and compare it with purchasing the same property in the upcoming spring market, where a realistic 3% appreciation would bring the price to $515,000. At today’s 4.44% fixed rate, your monthly mortgage payment would be around $2,500. If you waited and bought at $515,000 with a slightly lower fixed rate of 4.19%, your monthly payment would be approximately $2,400. While this $100 monthly savings in mortgage costs may seem appealing, it pales in comparison to the $15,000 price increase you would incur by waiting. In other words, even with a lower interest rate, the potential savings on monthly mortgage payments do not offset the higher purchase price, making a strong case that waiting for further rate drops may not provide a significant financial advantage.

The current market indicators— Canada’s generational population boom, lower interest rates, increasing buyer participation, and a rejuvenated US economy —all point toward a potentially robust spring market. Acting now could offer buyers the advantage of entering the market at a point of calm before possible acceleration. While there are factors that could influence the market otherwise, the prevailing signals suggest that taking action now may yield a greater long-term benefit than waiting for incremental rate drops.