- Rates are trending downward, as they have nearly every Spring since 2009 to some extent. This trend is likely to stick around awhile.
- Should you rush to lock in long term? Likely No.
- Should you consult with an independent Mortgage Broker to avoid pitfalls of locking into a restrictive product without fully considering the potential ramifications? Yes – consult with your Mortgage Broker.
- Will rates trend lower still? Yes, by many indications they will.
- Fixed rates will likely continue to move around in the .25% – .50% bandwidth.
Year in and year out the topic of ‘coming interest rate hikes‘ remains a popular one. Without shortage of either headlines or talking heads consistently assuring us that ‘the great interest rate rise’ is just around the corner.
A series of headlines warning of impending rate hikes;
Yet not only have rates failed to rise with any sense of vigor or consistency, instead they continue to seek new record lows. It seems these past 5 years each attempt falters quickly and leads to deeper reductions than were seen previously. A bit of a rollercoaster for sure.
In June of 2013 when last we had a sudden rise in 5yr fixed rates (and really it was only longer term fixed products that rose) from lows of 2.79% all the way up to 3.69% for a brief period I suggested that everybody be cool. Indeed my crystal ball was well tuned and currently we find ourselves back in a sub 3% long term interest rate world.
However, as lenders pack a variety of landmines into their ‘no-frills’ or ‘low-frills’ 2.99% or even 2.83% offers, the guidance of an unbiased independent Mortgage Broker becomes more important than ever.
Do not blindly lock in or jump to one of these ‘amazing’ products, as the fine print which so often goes unread can easily come back to take a massive bite out of us.
Although 10 out of 10 Canadians believe they are making the right decision when it comes to locking into long term fixed rate contracts, in fact 6 out 10 Canadians break their fixed rate mortgages at an average of 38 months. For important details around the potentially significant penalties (which are still part of a blended rate too) please click and read more here.
Variable remains well worth a conversation as we approach 39 Bank of Canada meetings with no change to Prime rate. Nearly 4 years of the variable simply not being very variable at all. With another year, or two, on the horizon.
In the meantime get ready for more headlines on how this trend of 5 years just cannot continue. However it in fact can. The market which dictates interest rates is not a market that concerns itself with over-hyped household debt numbers, nor with bidding wars on homes and steadily rising Real Estate prices.
The Economy as a whole is what will drive rates up or down, and until you start seeing an abundance of great economic news not just within Canada, but also from our very influential neighbours to the South low interest rates that ‘just cannot last’ will continue to last for some time to come.
Have an excellent weekend!