Just as the majority of experts were calling for, the Bank of Canada increased their overnight rate by a ¼%, which should affect your variable rate mortgage by the same. The Bank of Canada is cautiously predicting another two rate hikes this year, however, those rate hike decisions will be strongly influenced by whether inflation continues to rise, if the NAFTA outcome is negative for Canada and the effects of the Stress Test that was introduced January 1st. These factors could have a dramatic effect on Canadian’s spending, refinancing and purchasing homes. That being said, most other indicators are looking very positive which is driving up rates. The bond market, which somewhat controls the longer fixed mortgages, has been rising and there is more pressure for it to continue. Some lenders have already increased their rates.
If you’re getting nervous, please contact your mortgage broker at the Mortgage Centre in Kitchener Waterloo to discuss the following strategy, before you lock in direct with your lender. Lock in rates are generally a touch higher than the 5 year fixed rates available to us on a brand new mortgage. If the 3-month interest penalty to break your current variable mortgage is relatively low, it may make sense to do a no-fee switch to another lender for a 5-year fixed rate, adding in the penalty. We can hold the rate for 120 days, during this time you will continue to save with your lower variable rate mortgage, which will help make up for some of the 3-month interest penalty. The 5-year fixed rate we can secure will likely be lower than the lock-in rate offered by your lender, which will ideally put you ahead in the end.
If you are thinking of locking into a fixed rate, please contact your lender, ask for the lock in rate and available terms and have them hold it for a couple of days. Email or call The Mortgage Centre KW with the rate and we can discuss whether this strategy makes sense for you.