Various lenders raised rates yesterday, and more will do so in the next 48 hours. There’s still time to lock in a decent fixed rate…but probably not much.
“[Yesterday’s 60 bps hike] is actually a fairly large increase reflecting what’s happening in the bond market lately.” – CIBC economist, Benjamin Tal (Vancouver Sun).
Discounted 5-year fixed rates will probably land in the low 4% range once all lenders are done raising their rates. That’s still way below the 10-year average of 5.22%.
ING’s self-serve online rate holds have been popular as people rush to secure a rate. If you get one, keep two things in mind:
Once your application turns “live” with ING (i.e., once you submit a formal application), you’ll then need to qualify under ING’s normal lending guidelines. If you don’t meet its lending criteria at that time, you won’t be approved. That’s why it’s a good idea to work with an ING-approved mortgage planner to get yourself pre-qualified.
If you don’t have time to consult a mortgage planner before submitting your ING rate hold, call one after. If you have an ING-broker close your rate hold, you’ll get professional mortgage advice and the potential for a slightly better rate.
If you’re in a “prime plus” variable mortgage (like prime + .25% for example), talk to a mortgage planner about the options. If you’re committed to staying variable instead of locking in, have your advisor run the numbers to gauge the benefit of switching to a prime – .50% variable.
“No one is expecting rapid rate increases from the Bank of Canada,” says BMO’s director of mortgages, John Turner. “But for those customers thinking about buying, interest rates are as low as they ever will be…” (Vancouver Sun)
“It’s possible that we’ll get a 10 or 15 basis point correction, but the direction [of rates] is up, not down…This interest rate cycle has turned…The next move will probably be another increase, although it won’t be 60 basis points. It will be much more moderate.” – Peter Routledge, senior VP at Moody’s (CTV)
“I can’t see any [rate] movement back down anytime soon.” – Judith Cane of the Financial Advisors Association of Canada (Money)
If you’re thinking of breaking your fixed mortgage for a lower rate and you have an IRD penalty, now is the time to do it. You can lock in a sub-4% fixed rate today, and then when rates rise, your IRD penalty will drop and save you some money.
Here’s a short primer on what influences mortgage rates.