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After staying safe by spending more time at home, many Canadians are evaluating their living situation and trying to decide if it's a good time to buy a new home. Here's how to evaluate your options in today's market.

If, like most Canadians, you’re spending more time at home these days, you might be thinking about how a new home might better suit your needs. But you’re probably also wondering what impact the current pandemic might have on the overall housing market and the broader economy, and whether you should consider adjusting your home-buying plans in response.

Buying a home at any time — not only during the current pandemic — requires balancing your personal finances with external factors. Personal factors like your income, savings for the down payment, and amount of personal debt can all influence your ability to purchase the home you want, while external factors like current real estate prices and interest rates will also affect your home-buying choices.

The current pandemic may be impacting the housing market and the broader economy — by affecting the number of homes for sale, and influencing interest rates. Here are some ways you can incorporate your personal financial situation, the current state of the housing market, and changes in the broader economy into your home-buying decision-making process.

Q: How Do My Personal Finances Impact My Home-buying Options?

A: Whether you’re a first-time buyer or a seasoned home buying pro, if you’re considering purchasing a home, the first place to start is to arm yourself with information about how much you can afford to spend on a new home.

An online mortgage affordability calculator can help you find out how much you may be able to afford to spend on your mortgage. And the RBC True House affordability tool can give you a personalized estimate on how much you could prequalify for — so you know how much home you may be able to afford before you start looking. Tools like these bring together your household income, monthly expenses (such as car payments), as well as the expenses associated with owning a home (such as property taxes, utility costs, and condo fees). Current mortgage rates and how long you want to take to pay off your mortgage are also important factors to consider when planning to purchase a new home.

If you already own your home and plan on selling to offset the cost of your new home, you can find out how much your home may be worth using a tool like the RBC Home Value Estimator.

Q: With Interest Rates Being Low, Should I Buy Now?

A: Once you’ve determined how much you may be able to afford, you may wonder how potential interest-rate changes might affect your home-buying decision.

Mortgage payments are made up of both principal (a repayment of the loan you take to buy your home), and interest.

  • When interest rates rise, if you have a variable-rate mortgage, your monthly payment might go up, or the amount of your payment devoted to interest might rise.
  • If you have a fixed-rate mortgage, your payments won’t change until you renew your mortgage.

The Bank of Canada sets interest-rate targets that, in turn, influence mortgage rates. Today, partly in response to the current pandemic, these targets are at historic lows. The Bank of Canada projects that to help support economic recovery in Canada, interest rates are projected to stay low over the next 18 to 24 months.

Many mortgages offer various pre-payment options that will allow you pay off your mortgage faster, saving you interest. These can include the option to “double up” payments, with the extra payment going directly to your mortgage principal, reducing the outstanding balance directly.

Q: Should I Wait to See If Housing Prices Go Down?

A: Because economic recovery from the COVID-19 pandemic may be slow, it can be challenging to predict how housing prices might change in the coming months.

Both the number of homes for sale and the number of sales transactions are lower than a typical spring season. In fact, national statistics from the Canadian Real Estate Association (CREA) show that current housing sales are the lowest they’ve been in 36 years.

But as economic uncertainty continues, some factors suggest housing prices may stay stable:

  • Canadian mortgage lenders provide mortgages to borrowers in a strong financial position.
  • The Canadian government is providing income support to help households meet their bills.
  • Many lenders are helping homeowners temporarily defer mortgage payments.

So far, the data backs this up: CREA reports that from April 2019 to April 2020, the national average sales price declined by just 1.3 per cent. Of course, the type of housing — condo, semi-detached, and detached — and its location play a part in determining the sale price.

If you’re like many Canadians, having to spend more time at home may be making you re-evaluate your housing needs, and wondering whether this is an opportune time to make a change. No matter where you are in your home-buying journey, having more information on hand can help make the right choices for your housing needs — and if you’re looking for more personalized support and answers, an RBC Mortgage Specialist can lend a hand virtually.