Cheap money is here to stay for a bit longer
March 1, 2018 (Marko Gelo, President, Home Financing Solutions Inc.)
Mortgagors in Canada have experienced quite a bit of volatility in the past few years, especially with all the recent changes to mortgage qualification guidelines. So as far as qualifying for a mortgage goes, it’s much tougher then ever before. But what about mortgage interest rates, where are they headed – how much longer can we expect cheap money?
All indicators are pointing towards continuous increases in Prime Rate (currently at 3.45%). By the end of 2018, you can except two more rate announcements that will bump up the Prime Rate to 3.95%. Fixed mortgages will also follow suit, but at a more gradual pace. Today, you can still lock in for a 5 year fixed mortgage in the low 3’s. Expect some volatility, but no significant swings, up or down. Be careful when selecting variable rate mortgages; demand a strong discount and stress test yourself for any potential payment increases (use our online calculator to see how your payments would change with a rise in interest rates).
Remember the 80’s?
From 1973 to 1991 the 5 year fixed mortgage rate never dipped below 10%. And in a gloomy period in the 80’s interest rates hovered between 14% to 20%. With the current price of real estate in Canada’s major markets and the anti-inflationary forces of globalization (injection of low priced imports keeping domestic prices in check) it’s unlikely that significant rate hikes will occur.
Always use a mortgage broker
More than ever, the mortgage industry is becoming more diverse in terms of mortgage qualification guidelines and interest rate offerings. Always consult with a mortgage broker to give yourself the best opportunity possible for the most gainful outcome (lowest interest rates and favourable terms). Whoever is handling your mortgage, always ask how many lenders they have access to…the answer should be at least, 10.
Don’t hesitate to reach out to me directly if you would like to discuss your situation in greater detail.
Take care, and enjoy the cheap money.
