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What’s Happening With Mortgage Rates?

What’s Happening With Mortgage Rates?

The reality for most Canadians is that we are not buying our houses in cash, so we rely on a mortgage – sometimes two – to help us acquire the single largest purchase we will ever make in our lives. It can be a scary time with a lot of uncertainty, and you want to be certain when you’re dealing with that much money so here’s what is happening with mortgages and other variable interest rate financing products in Canada.

what's happening with Mortgages rates

We’re Learning from Our Past

In 2008 and 2009, there was a very large financial crisis that sent the housing market into a frenzy with unbelievably low interest rates. This financial crisis hit globally and the interest rates available on mortgages sunk so low that people who previously couldn’t afford a mortgage were now qualifying to get a mortgage and purchase property. This kind of market simply couldn’t last as many people made home purchases that they really couldn’t afford if interest rates were to change – and now they are changing.

Prime is on the Rise

The Bank of Canada sets the benchmark, or “overnight rate”, and financial institutions across Canada then base their own prime interest rates on this one. The Bank of Canada ideally wants to set it to anywhere from 2.5% to 3.5%, which is considered a neutral zone where it is neither explicitly stimulating nor cooling our economy. For those who are baby boomers, you might remember the double-digit mortgage interest rates of the 80s. It is unlikely that we’ll see those kinds of rates again, but the interest rates seen after the 2008 and 2009 financial crisis are definitely not here to stay.

What does this all mean?

For those homeowners who have fixed rate mortgages it doesn’t really mean anything – right now. If you have a variable rate mortgage or home equity line of credit, then this will mean you could see immediate consequences as soon as the rates change. With a variable rate mortgage, you will benefit from low rates when fixed rate mortgage holders don’t but you’re also subject to fluctuating markets.

To put this into context, if you hold a $500,000 mortgage with a rate of 2.85% your monthly payments would amount to about $2,328. That same mortgage at a rate of 4.15% would mean payments of about $2,671 every month. That is a difference of $343 every month with only 1.3% difference in interest.

What can I do now?

 If you are currently looking to renew your mortgage or are considering purchasing a new home then now is the time to do it. Since it’s really hard to predict the markets tomorrow, the best thing you can do to lock in lower interest rates now is to contact Matrix Mortgage Global today to discuss what options are available to you.

At Matrix Mortgage Global, we can help you get started on this path. Call us today at 1-877-371-5293.

 

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