Hold onto your hats, folks – it looks like fixed rates are on the rise. But that’s not necessarily a bad thing.
Due to a recent spike in bond rates – the metric that influences fixed rate mortgages -the big banks, and many non-bank lenders, have since increased their five-year fixed rates accordingly. A few weeks ago it was possible to find five-year fixed rates for under 4%, which is a rarity now. To add to that, many of the lower-term fixed rates – namely, the three- and four-year mortgages – have also spiked.
If you’re up for renewal within the next four months or so, or if you’re looking to buy sometime soon, it would be wise to lock into a five-year fixed rate now. Some lenders are still offering rates at 3.79%. If your mortgage needs are a little further off, you’ll be best served by looking on the bright side of this situation.
The record-low fixed rates were causing real estate hysteria in many Canadian markets over the last few months. Combine that with record-low inventory, and that’s a recipe for price escalation. Many economists predict that the raising of fixed rates will bring some balance to the market, and eradicate those pesky bidding wars.
A little more balance will allow the Bank of Canada to keep its promise and maintain its low Prime rate until mid-2010. This means variable rates – which, unlike fixed rates, rely on the Bank of Canada’s rate decisions – should remain low for the next eight months or so. Many believe that more inventory will accumulate in the market in that time so, combined with less demand, you might still be able to get some good deals.
It’s important to remember, also, that while fixed rates aren’t as low they have been in recent months, they’re still low. A couple of years ago, 5.35% was considered low, and in 2000 7.25% was still considered a good deal!
If you’d like to see what type of rate you qualify for, drop me a line for a preapproval!
