Historically Low Mortgage Rates Take a Jump
Canadians have been enjoying historically low mortgage rates for some time now, but as economists predicted, we recently saw them increase. For example, the 2.99% 5-year fixed rate is now up to 3.49%.
While rates seem to by holding for now, there could be more increases to come.
“Lately we’ve seen increases in Government of Canada bond yields, and since fixed mortgage rates are based on these bonds, they have been trending up as well,” says Robert Russo, Mortgage Consultant for INVIS. “It’s a good idea for those thinking of buying, refinancing or renewing to get preapprovals now and lock in a rate before possible further increases.”
“We can’t be certain if this trend is permanent or just short term,” Russo continues. “Even with recent increases, fixed rates are still historically very low. Variable rate mortgages, on the other hand, are tied to the Bank of Canada’s lending rate. The new central bank Governor Stephen Poloz is not looking to depart from existing monetary policy, so many economists believe there will be no change to the key rates for at least another year.”
1% Makes a Big Difference
A 1% difference on your mortgage rate can make a big difference on your monthly payment. For example, on a $250,000 mortgage at 3.49% over a 25 year amortization period your monthly payment would be about $1,246, whereas the same $250,000 mortgage at 4.49% at 25 years would be about $1,382 per month. That's a difference of $136 per month, or $1,632 per year.
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