Mortgage rates have been in the news and at the forefront of people’s minds lately. Several major banks raised their mortgage rates in June – the same month the devastating southern Alberta floods ruined homes in Calgary, Okotoks and High River. Those who are being forced to relocate – either temporarily or permanently – are understandably nervous about what the hike may mean for their future.
The news, however, is not all bad. With Mortgages By Candice, you always have options. The changes applied to some, not all types of mortgages, and you’re by no means obligated to stick with your traditional lender for your mortgage.
Why Did Mortgage Rates Rise?
RBC, Scotia Bank and TD all announced minor rate hikes in June. RBC moved their four-year, closed-rate mortgage ten basis points to 3.39 per cent, their five-year equivalent increased 20 basis points to 3.6 per cent, and their 10-year loan was raised 30 basis points to 4.29 per cent. These actions were the result of the interest rate on government bonds climbing throughout the months of May and June. Bond yields and mortgage rates are inextricably tied together. On May 1, a five-year bond issued by the federal government yielded 1.15 per cent. Today, the yield stands at 1.84 per cent. Bonds are generally thought of as “defensive holdings” and the fact that they are being sold off actually signals an increase in optimism with regards to the economy. It’s better to have funds in cyclical and growth investments when the economy begins to be able to self-sustain again.
This is only one increase, and does not necessarily mean there will be another one. A better economy means improvements in wages and employment numbers that are predicted to eventually offset the impact of rising mortgage rates. And variable-rate mortgages are safe from changes until late 2014.
For any homeowner, or those thinking about buying their first home, the term “rate hike” is that last thing anyone wants to hear. It’s understandable to be anxious. It’s tough to know when exactly is the right time to jump into the real estate market, and the added pressure of busy real estate markets like we’re used to in Calgary, Okotoks and High River doesn’t help! Remember, though, mortgage rates are still very affordable, and remain far lower than they were even just 10 years ago.
How to Beat the Mortgage Rate Hike
Canada is in a far better position than many other countries to be able to sustain a mortgage rate hike. Since about 70 per cent of Canadian mortgages are currently fixed-rate, and most of those are for five-year terms, rate increases won’t hit everyone all at once. When the U.S. housing crash occurred about 75 per cent of homeowners’ mortgages were variable and rising regularly, and so the majority were unable to absorb the difference. As well, tougher lending laws in Canada mean the vast majority of those with high-ratio mortgages have good credit and are paying their bills on time.
There is also a lot of competition in the Canada mortgage market, and right now many lenders are simply watching and waiting to see how consumers accept rates hikes. So that makes right now an excellent time to have a look at what the others are doing.
|Bank Rates||Term||Our Rates|
|3.09 %||1 YR||2.79 %|
|3.14 %||2 YR||2.69 %|
|3.65 %||3 YR||2.94 %|
|4.54 %||4 YR||3.09 %|
|5.14 %||5 YR||3.39 %|
|6.35 %||7 YR||3.79 %|
|6.75 %||10 YR||3.99 %|
|6.75 %||5 YR VAR||2.60 %|
|4.00 %||HELOC||3.50 %|
*Rates Subject to Change Without Notice, OAC
Right now, mortgage rates supplied by Mortgages By Candice remain below those supplied by major lenders, and we predict they will stay at similar levels for some time to come. If you have any questions about how “beat the hike”, please contact us!