To LOCK in or NOT?
Now might just be the best time to lock into a fixed-rate mortgage, especially for those homeowners on a tight budget, according to an expert broker.
The Bank of Canada hiked its overnight lending rate by 25 basis points Wednesday and variable mortgage rate products offered through major lenders are expected to rise in step with bank prime lending rate moving to 3% from 2.75%.
Despite the increase, variable rates -- hovering between 2.05% and 2.25% these days -- still offer savings compared to fixed-rate plans in the near term.
But there is an argument for locking into a fixed rate sooner rather than later, said a regional manager at Brokerage based in Calgary. The rate for the popular five-year fixed mortgage has recently dropped to a commonly available 3.64% with Mortgage Alliance and as low as 3.35% for Three year fixed mortgage.
Major players in Mortgage industry feel "We haven’t seen rates this low in recent memory".
“There are lots of people out there who are saying: Why would you overlook the fact that we haven’t seen five-year rates this low in a long, long time?”
“Why would you not take advantage of historic low interest rates?”
Answer to this question is not so clear-cut, Some people are choosing variable options because they are still cheaper and may be for some time.However mortgage holders do need to consider that variable rates do change, eventually.
“ Question is when and how much it will increase not if it will increase.”
Variable rates have historically been the cheaper option over the entire life of a mortgage but not everyone can stomach the often-dramatic swings in monthly expenses. People who are generally nervous or who are on a tight budget might be better off locking in now then wait for longer time. Homeowners considering the switch to a fixed plan could look into whether there is penalty for switching mid-term which could affect their financial situation.
Either way, both variable and fixed-rate mortgage holders can take advantage of current borrowing prices by paying down as much of the principal amount as quickly as possible. That way come renewal time and as rates go up total debt burden will be lowered.
Variable rates are set by the central bank, the bond market influences fixed-rate mortgages.
The slower-than-expected economy has fueled investor interest in the bond rally, pushing yields down and allowing banks to offer attractive fixed-rate products.
For More information and a FREE review of your mortgage and Financial situation call me on 647-832-2369 or email me at pdesai@mortgagealliance.com
Despite the increase, variable rates -- hovering between 2.05% and 2.25% these days -- still offer savings compared to fixed-rate plans in the near term.
But there is an argument for locking into a fixed rate sooner rather than later, said a regional manager at Brokerage based in Calgary. The rate for the popular five-year fixed mortgage has recently dropped to a commonly available 3.64% with Mortgage Alliance and as low as 3.35% for Three year fixed mortgage.
Major players in Mortgage industry feel "We haven’t seen rates this low in recent memory".
“There are lots of people out there who are saying: Why would you overlook the fact that we haven’t seen five-year rates this low in a long, long time?”
“Why would you not take advantage of historic low interest rates?”
Answer to this question is not so clear-cut, Some people are choosing variable options because they are still cheaper and may be for some time.However mortgage holders do need to consider that variable rates do change, eventually.
“ Question is when and how much it will increase not if it will increase.”
Variable rates have historically been the cheaper option over the entire life of a mortgage but not everyone can stomach the often-dramatic swings in monthly expenses. People who are generally nervous or who are on a tight budget might be better off locking in now then wait for longer time. Homeowners considering the switch to a fixed plan could look into whether there is penalty for switching mid-term which could affect their financial situation.
Either way, both variable and fixed-rate mortgage holders can take advantage of current borrowing prices by paying down as much of the principal amount as quickly as possible. That way come renewal time and as rates go up total debt burden will be lowered.
Variable rates are set by the central bank, the bond market influences fixed-rate mortgages.
The slower-than-expected economy has fueled investor interest in the bond rally, pushing yields down and allowing banks to offer attractive fixed-rate products.
For More information and a FREE review of your mortgage and Financial situation call me on 647-832-2369 or email me at pdesai@mortgagealliance.com
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