Last quarter saw the highest percentage of insured borrowers switching to variable-rate mortgages since Canada Mortgage and Housing Corporation began tracking these statistics. Why the change?
Home owners know it will save them money!
We have watched the Bank of Canada hike it’s overnight rate 5 times since July 2017. According to most financial industry professionals we can expect the benchmark rate to remain unchanged until next Spring at least. How can most business leaders, economists and other professionals be so certain?
When the Central Bank institutes a rate hike it means they are confident that the economy can sustain increased growth. The Canadian economy stalled last quarter; the Bank took the hint and chose not to include a rate hike in their announcement on December 5th. So what’s going on with our economy?
Nothing very optimistic. The stock market has been making downward movement along with the Canadian dollar. The oil sector can’t seem to catch a break and has been inching closer to crisis mode. The housing industry has continued to slow as we head into Winter, and potential home owners continue to struggle with stricter borrowing rules. Trade war threats continue to put stress on the business sector, causing investments to fall in the last quarter. Household savings has come down to a near all-time low at just 0.8%. And consumer spending in almost every category has gone down.
The Bank’s crystal ball seems a little clouded and it’s not likely they will increase interest rates again until they can see the future a little more clearly. The Bank does insist that they will trend toward a “neutral range” of 2.5-3.5%, it wouldn’t make sense to do so until they have a better idea of what lays on the horizon.
Evidence from the bond market also indicates that rates likely won’t increase. Canada’s five-year bond yield guides the five-year fixed mortgage rates, which is down to it’s one-year midpoint. However, fixed rates haven’t budged. It looks like the banks are trying to maintain profits for as long as possible.
Despite that, lenders are competing over a smaller mortgage market while home buyers continue to grapple with the new mortgage regulations. This means lenders are willing to give you a better deal in order to make a profit rather than miss out on a sale altogether.
Great rates are to be had all around! Your Trusted Mortgage Broker’s best rates for well-qualified borrowers who choose variable-rate mortgages are now as low as 3.35% to refinance, 3.0% for a conventional renewal or purchase, and 2.75% for a default insured mortgage. Even if the Bank were Your Trusted increase rates three more times in 0.25% increments (not likely until oil prices become more favourable and trade uncertainties ease) you would still be ahead of those locked in fixed-rate mortgages.
To get started with a variable-rate mortgage contact us today!