If mortgage rates fall, will competition simply push prices up?

[coffeeAndGate]

I'm deciding whether to buy a serviced apartment for C$1,249,000 with financing at 6.19%, or wait in hope of a lower rate. My concern is that cheaper borrowing could bring buyers back before local inventory improves, pushing prices up and cancelling out the saving.

I can afford the purchase now, but I don't want the decision to depend on a favourable refinance or an easy resale. What stress tests would you run, particularly for a serviced apartment?

 

[woodworksAndWorkshop]

I would test the purchase without assuming either lower rates or rising prices. Can you carry the monthly payment if the rate at reset is two percentage points higher, while also absorbing the apartment's service costs? Then model a sale after a price decline, including selling and early-repayment costs. If either scenario forces a quick sale, today's affordability may be too tight.

 

[MinaGale]

What does “afford” mean here: comfortable monthly cash flow, or simply lender approval? The loan-to-value, fixed or variable structure, expected holding period and arrangement fees could change the answer considerably. Also ask whether the serviced-apartment arrangement affects the lender's refinance terms or the range of future buyers. A standard apartment comparison may not be enough.

 

[AlbaCane]

I wouldn't accept the premise that falling rates must push prices up. They can increase demand, but inventory, buyer confidence and lending criteria still matter. Waiting is not automatically safer, though: you would be exchanging a known purchase and rate for two unknowns.

The serviced element is the bigger caveat to me. If it narrows the resale or lending pool, a general market recovery may not translate cleanly to this unit.

 

[MinaGale]

Agreed on separating the unit from the wider market. For the financing comparison, use the period you realistically expect to keep the mortgage rather than the full amortization. Add interest, arrangement fees and any early-repayment charge over that period. Then compare portability: if you move, can the loan travel with you, and under what conditions? A lower advertised rate can lose once those items are included.

 

[hana_bloom]

I'd make three columns: buy now, wait with no price change, and wait with a higher purchase price. For each, enter the required deposit, monthly affordability, fees and a deliberately conservative refinance rate. Then add two exit cases: selling earlier than planned and being unable to refinance on the assumed terms.

Before committing, get clear answers from the lender on how it treats this specific serviced apartment, not just the building category generally.

 

[coffeeAndGate]

This has helped me identify the weak point in my thinking: I was treating refinancing as the likely solution rather than an optional upside. I'll compare total borrowing costs over my expected holding period, include arrangement and early-repayment fees, and run a higher reset rate alongside a lower resale value. I'll also confirm the lender's position on portability and on this particular serviced arrangement before deciding.