Many Canadians are watching interest rates climb and wondering if owning a home is slipping out of reach. Higher rates mean larger monthly payments, tighter lender requirements, and more stress for buyers trying to make the numbers work. But here’s the reality: people are still buying homes, and with the right strategy, you can too. High interest rates may change the playing field, but they don’t eliminate your chances of success.
In this guide, I’ll show you practical, real-world strategies to help you buy a home even when borrowing costs are high. You’ll learn how to adjust your expectations, make smart financial moves, and use creative solutions that will help you secure a home and protect your long-term financial health.
1. Adjust Your Price Expectations — But Don’t Settle for Less
When interest rates rise, your mortgage affordability naturally drops. What you could qualify for at a 2% rate looks very different at 6%. The mistake many buyers make is continuing to search for homes based on old numbers rather than adjusting to the new financial reality.
This doesn’t mean giving up on a great home. Instead, it means refocusing your search on areas or property types that still fit your budget. I’ve seen buyers in the GTA shift their focus from detached homes to semi-detached properties or townhouses, allowing them to stay within budget while building equity. Sometimes, it means looking just outside your desired neighbourhood or considering homes that need a bit of cosmetic work. Over time, as rates normalize or your income grows, you can always upgrade — but getting into the market now keeps you ahead.
2. Increase Your Down Payment to Offset Higher Rates
A larger down payment is one of the smartest ways to combat high interest rates. The more you put down, the less you need to borrow, which reduces your monthly payments and the total interest you’ll pay over the life of your mortgage. It also makes you more attractive to lenders, which could mean better terms.
If you’re struggling to come up with a bigger down payment, consider leveraging programs like the Home Buyers’ Plan (HBP), which allows you to withdraw up to $35,000 tax-free from your RRSP for a down payment. Additionally, gifts from family members are becoming increasingly common. Lenders in Canada will accept gifted down payments, provided they come with a signed letter stating they do not need to be repaid. Increasing your down payment, even by a few percentage points, can make those higher interest rates far more manageable.
3. Consider Alternative Mortgage Structures
When rates are high, flexibility matters. Fixed-rate mortgages give predictability but can lock you into a high rate for several years. Variable-rate mortgages, on the other hand, often start lower but fluctuate. In a rising rate environment, they can be risky — but if economists predict rates will start to fall within the next couple of years, going variable now with a plan to lock in later could save you thousands.
Another option is to explore shorter-term mortgages or hybrid structures that give you flexibility without overcommitting. I recently worked with clients who chose a two-year fixed mortgage at a higher rate but plan to refinance once rates drop. That strategy allowed them to enter the market now and avoid paying inflated interest rates for a full five-year term. Always consult with a mortgage broker to understand which structure best suits your risk tolerance and goals.
4. Reduce Debt and Improve Your Financial Profile
Higher interest rates mean lenders scrutinize applications even more closely. Your debt-to-income ratio and credit score matter now more than ever. Before applying for a mortgage, take the time to reduce unnecessary debts — especially high-interest credit card balances. Every dollar of debt you carry reduces your borrowing power and can push lenders to offer less favourable terms.
Improving your credit score can also open doors to better rates. Simple actions, like paying bills on time, keeping credit utilization under 30%, and avoiding new credit applications, can raise your score within months. In fact, according to Equifax Canada, buyers with credit scores above 760 tend to receive the best rates and most flexible terms from major lenders. Taking control of your finances now positions you for better opportunities, even in challenging rate environments.
5. Be Strategic and Don’t Wait for the “Perfect” Moment
Many buyers make the mistake of waiting for interest rates to fall before entering the market. But the truth is, when rates drop, competition increases and prices surge. The best deals are often made in times of uncertainty, not stability. Sellers are more willing to negotiate when fewer buyers are around.
I had a client in Richmond Hill who purchased a property during a period of rate hikes. They secured the home for $40,000 below asking because competition was low. Yes, they accepted a higher interest rate short-term, but they plan to refinance when rates normalize — and they’re already building equity in a home that would have cost significantly more in a lower-rate, high-demand market. Timing the market perfectly is impossible; acting strategically is what wins.
Conclusion
While high interest rates may feel like a roadblock, they can actually create opportunities if you approach the market with knowledge and flexibility. By adjusting your expectations, boosting your down payment, exploring creative mortgage structures, and strengthening your financial profile, you can still afford to buy the home you want — and build wealth for the future.
At The Tar Team, we specialize in helping buyers navigate tough markets with confidence. We’ll connect you with trusted mortgage professionals, help you identify the right properties, and guide you through negotiations — even when conditions are challenging.
Contact us today and let’s create a homeownership plan that works for you, no matter where rates stand.