With changing interest rates comes the age-old question: is it better to rent or to buy?

financialpost.com:

In a recent survey, Royal LePage found that 29 per cent of renters had contemplated buying a property before renewing or signing a lease. And thirty-three per cent of these would-be buyers said they were waiting for interest rates to decline. Now that theBank of Canada (BoC) has lowered its key rate to 4.75 per cent, it seems a good time to revisit the age-old question of whether it’s better to rent or to buy. The Financial Post’s Shantaé Campbell weighs the options in this evolving economic terrain.

Thanks to the Bank of Canada’s decision to drop its key rate, borrowing is now slightly cheaper, making mortgages slightly more affordable. Those considering buying a home may be tempted by the prospect of lower monthly mortgage payments.

According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10 per cent downpayment on a $703,446 home with a 5-year variable rate of 5.95 per cent amortized over 25 years (total mortgage amount of $652,727) has a monthly mortgage payment of $4,157. With the BoC’s 25-basis point decrease, their variable mortgage rate drops to 5.70 per cent, lowering their monthly payment to $4,061. This means that the homeowner will pay $96 less per month, or $1,152 less per year in mortgage payments.

“People who are considering getting into home ownership may find that that’s more affordable, but at the same time, it’s also likely to bring out people who’ve been sitting on the sidelines, which could end up pushing prices up,” Desjardins economist Kari Norman said.

Despite lower interest rates, home prices in many parts of Canada remain high. Vancouver and Toronto have average home prices around $1 million, necessitating a substantial down payment.

The five-per-cent rule is a helpful tool