Why You Shouldn’t Try to Time the Mortgage Market

As mortgage rates fluctuate, it’s tempting to try and "time the market," holding out for that perfect moment when rates are at their lowest. But timing the mortgage market is just as tricky as timing the stock market, and for most homeowners, this strategy often backfires. Here’s why making mortgage decisions based on trying to predict interest rate movements is a risky approach—and what you should focus on instead.

1. The Future is Unpredictable The Bank of Canada’s interest rate decisions can have a significant impact on mortgage rates, but trying to predict their moves is a gamble. For example, while many experts anticipate rate cuts in the near future, the exact timing and magnitude of these cuts remain uncertain. We saw a similar situation in the U.S., where the Federal Reserve made a larger-than-expected cut—something few had accurately predicted.

Waiting for a big drop that may never happen can cost you more in the long run. Fixed mortgage rates are tied to the bond market, which reacts to a multitude of factors like inflation, economic growth, and global events—things no one can perfectly predict. Delaying a mortgage decision while hoping for lower rates could lead to missed opportunities or higher rates when you’re finally ready to act.

2. Mortgage Rates Are Just One Piece of the Puzzle While it’s natural to focus on rates, other aspects of your mortgage could have a bigger impact on your financial situation. Terms, flexibility, amortization periods, and prepayment options can all influence your long-term costs. For example, new rules coming in December 2024 allow for 30-year amortizations for first-time homebuyers and new builds, which could lower your monthly payments more significantly than a small rate drop.

It’s also important to consider your overall financial goals. Locking in a slightly higher rate today may offer peace of mind and stability, ensuring predictable payments that allow you to budget effectively. Trying to time the market might save you a bit on rates, but if your strategy doesn’t align with your broader goals, it’s not worth the risk.

3. The Cost of Waiting If you’re waiting for rates to drop, you may not be considering the costs of delaying a purchase or refinance. For example, with home prices still on the rise in many parts of Canada, especially in high-demand markets, waiting for a rate drop could result in paying more for the home itself. Even a 0.25% drop in mortgage rates might not make up for a higher purchase price.

Additionally, if you’re nearing a mortgage renewal and waiting on your current lender to "hopefully" offer the best solution, you could miss out on the best rates available. And for those who locked in low rates during 2020 or 2021, renewal is especially crucial. Missing the right opportunity to explore competitive terms could cost you significantly over the life of your mortgage.

Focus on What You Can Control Rather than trying to outsmart the market, focus on what you can control. Talk to a mortgage professional who can provide guidance based on your unique situation, and keep an eye on upcoming policy changes that might benefit you. Remember, the best mortgage isn’t always the one with the lowest rate—it’s the one that aligns with your financial goals, offers the flexibility you need, and sets you up for long-term success.

As a mortgage agent, my goal is to help you make informed decisions that serve your financial well-being. If you're curious about how upcoming changes might affect your mortgage or want to explore options before your renewal, feel free to reach out. Let’s work together to ensure you’re prepared for whatever the market brings, and that your mortgage strategy aligns with your financial goals.