Hello world!
Don’t rush to lock into a fixed rate mortgage!
So you’re in a variable rate mortgage and the discount is prime -.6% or more. You’ve seen interest rates rising over the past year. It is expected the Bank of Canada to push rates up another .75% in the coming year, making your variable rate to be on par with some of todays fixed rates. but what happens after that? It’s possible for a cooling period at that point, followed by potential rate drops for the following year. Here is why I think this could happen
– The Bank of Canada has stated the economy is running at or near capacity for at least 2 of their recent announcements. While this sounds as a positive statement and leaves one thinking the economy is as healthy as it can possibly be. My take is a little different. Considering that once you reach capacity there is no more room to grow. I would suggest there is only one way for things to go here, and historically this analogy has held true.
– The Canadian real estate market will be impacted by rising rates, and already tightening mortgage qualification guidelines known as B20. This sector of the economy has seen robust growth over recent memory and has been a major driver of the Canadian economy. Any cooling here will have a heavy and direct impact on the economy
– Inflation – Increasing inflation is a factor that can lead to rising interest rates to rein it in. Currently Inflation is not out of hand and we saw lower levels of inflation the month of September
– Rising interest rates will impact consumer spending which will contribute to the slowing of the economy
– Changing trade agreements and recent Tariffs with numerous countries being involved could/will drive up the costs for many companies having an impact on the stock market as profit margins shrink.
– Global economic uncertainty largely within the EU
now if you are in a variable rate that is not discounted as described above, Now would be a good time to call us and review your situation to develop a plan moving forward.
It’s important to consult a mortgage broker before simply applying for a mortgage just anywhere. The spread in fixed rates can be as much as 0.6% which is significant and the variable rates currently differ by as much as a full 1.0%. to put that in perspective. 1.0% is $1000 in interest per year per 100k of debt. So is you have a mortgage balance of 300k thats $3000 per year, multiply that by a 5 year term and that could cost you $15000.00