Consumer Confidence Cautiously on the Rise in Ottawa Resale Market
The number of homes sold through the MLS® System of the Ottawa Real Estate Board (OREB) totaled 613 units in December 2024. This was a 7.9%increase from December 2023.
Home sales were 6.8% below the five-year average and 2.7% below the 10-year average for the month of December.
On a year-to-date basis, home sales totaled 13,526 units in December 2024- an increase of 11.8%from the same period in 2023.
“A year of wait-and-see came to a close with the expected slowdown over the holiday season,” says OREB President. “The latter half of the year brought signs of more favourable market conditions with consecutive interest rate drops, higher insured mortgage limits and extended amortizations. It’s early to assess the impact of these measures. And it’s an uphill battle against affordability and supply issues that persist.”
“Listing activity indicates that sellers anticipate improved conditions could spur more activity from buyers who have been keeping a close eye on the market but hesitant to make moves. Buyers are still limited in their selection of affordable inventory that can meet current demands, which stalls movement. While the improving market conditions are encouraging, the supply needs to be there. Coming political shifts are adding a layer of uncertainty but there is a trending optimism for more increased market activity in the months ahead.”
By the Numbers – Prices:
The MLS® Home Price Index (HPI) tracks price trends far more
accurately than is possible using average or median price measures.
• The overall MLS® HPI composite benchmark price was $639,500
in October 2024, an increase of 0.4% from October 2023.
• The overall MLS® HPI composite benchmark price was
$639,500 in October 2024, an increase of 0.4% from
October 2023.
• The benchmark price for single-family homes was $724,500,
up 0.7% on a year-over-year basis in October.
• By comparison, the benchmark price for a townhouse/row unit
was $506,900, up 1.6% compared to a year earlier.
• The benchmark apartment price was $407,500, down 3.4%
from last year.
• The average price of homes sold in October 2024 was $668,690
increasing 1.2% from October 2023. The more comprehensive
year-to-date average price was $678,081, increasing by 0.9% from
October 2023.
• The dollar volume of all home sales in October 2024 was
$788.3 million, up 47.7% from October 2023.
OREB cautions that the average sale price can be useful in
establishing trends over time but should not be used as an indicator
that specific properties have increased or decreased in value. The
calculation of the average sale price is based on the total dollar
volume of all properties sold. Prices will vary from neighbourhood to
neighbourhood.
By the Numbers – Inventory & New Listings:
• The number of new listings saw an increase of 10.4% from
October 2023. There were 2,089 new residential listings in
October 2024. New listings were 6.7% above the five-year average
and 17% above the 10-year average for the month of October.
• Active residential listings numbered 3,354 units on the market at
the end of October 2024, a gain of 8.9% from October 2023.
Active listings were 40.6% above the five-year average and
6.7% above the 10-year average for the month of October.
• Months of inventory numbered 2.8 at the end of October 2024,
compared to 3.8 in October 2023. The number of months of
inventory is the number of months it would take to sell current
inventories at the current rate of sales activity.
Breaking Your Mortgage Early
As mortgage interest rates fluctuate throughout 2024, many
homeowners are contemplating whether breaking their
mortgage early is worth the penalty. The idea of locking in a
lower rate and reducing monthly payments can be tempting,
but the cost of breaking a fixed-rate mortgage can be
substantial. Here’s a breakdown of when it makes financial
sense to break your mortgage early, and when it might be
better to stick with your current terms.
Why Break Your Mortgage Early?
There are a few key reasons why homeowners consider breaking their mortgage before the term ends:
1. Securing a Lower Interest Rate
One of the main motivations for breaking a mortgage is the
potential to secure a lower interest rate, which could significantly reduce monthly payments. If rates have dropped since you locked into a fixed-rate mortgage, you might be able to refinance at a lower rate, saving thousands of dollars over the term of the loan.
2. Accessing Home Equity
As home values rise across Canada, some homeowners may want to access their home equity to pay off debts, renovate, or invest. Refinancing by breaking your mortgage can allow you to borrow against your home’s increased value, often at a lower rate than other types of loans.
3. Life Changes
Major life events like moving, divorce, or financial changes may necessitate breaking your mortgage early. If you’re moving to a new home and can’t transfer your mortgage, or if your financial situation has changed, you may need to rework your mortgage to suit your new circumstances.
Understanding the Penalties
Breaking a mortgage typically comes with penalties, which can be calculated in one of two ways, depending on your lender:
1. Interest Rate Differential (IRD)
The IRD penalty is most common for fixed-rate mortgages. It is
based on the difference between your current interest rate and the lender’s current rates for a similar mortgage term, multiplied by the remaining balance and the length of the term. This penalty can be particularly high if rates have dropped significantly since you locked in.
2. Three Months’ Interest
For some fixed and variable-rate mortgages, the penalty is calculated as three months’ interest on your remaining balance. This method generally results in a lower penalty compared to the IRD, making it more attractive to break variable-rate mortgages.
Is It Worth the Cost?
To determine whether breaking your mortgage early makes sense, you’ll need to calculate the potential savings versus the cost of the penalty. Here’s how to approach it:
1. Calculate the Penalty
Start by asking your lender for an estimate of your mortgage breaking penalty. Be sure to ask whether the penalty will be
calculated using the IRD or the three months’ interest method, as this can significantly affect the total cost.
2. Estimate Your Savings
Once you know the penalty, calculate how much you would save by refinancing at a lower interest rate. Use a mortgage calculator to compare your current rate to the new rate and see how much your monthly payments would decrease. Multiply the monthly savings by the number of months remaining in your term to estimate your total savings.
3. Compare the Costs and Benefits
Subtract the penalty cost from your estimated savings. If the savings are greater than the penalty, breaking your mortgage could be a smart financial move. However, if the penalty outweighs the savings, it’s likely better to wait until the end of your term to refinance.
Scenarios Where It Makes Sense
1. Interest Rates Have Dropped Significantly
If you locked into a fixed-rate mortgage when rates were high and rates have since dropped considerably, the long-term savings from securing a lower rate may outweigh the penalty. For example, a homeowner with a 5-year fixed rate at 5.5% might benefit from breaking their mortgage early if they can secure a new rate of 4.2%.
2. You Have Significant Home Equity
If your home’s value has increased substantially, refinancing to access that equity might make sense, especially if you can lock in a lower rate on a larger mortgage. This can be particularly beneficial if you plan to use the equity to consolidate high-interest debt or make value-adding renovations.
Scenarios Where It’s Not Worth It
1. Minor Rate Changes
If the drop in interest rates is only marginal (for example, 0.5% or less), the savings might not justify the cost of the penalty. In such cases, it’s often better to wait until your mortgage term ends to refinance without penalties.
2. High IRD Penalties
If your mortgage lender calculates the penalty using the IRD method, the cost of breaking your mortgage can be prohibitively high. In such cases, even a significant drop in interest rates might not make it worth paying the penalty.
Conclusion
Breaking your mortgage early can be a strategic move in 2024, especially if interest rates continue to drop or if you need to access home equity. However, the decision ultimately depends on the penalty you’ll face and the potential savings. Carefully calculate the costs and benefits, and consult with a mortgage broker to explore your options. In many cases, it’s worth waiting until your term ends to avoid penalties, but if the savings are substantial, breaking your mortgage could be a smart financial decision.
