With all the changes this past week you may be asking what the heck is happening with interest rates?
Before we get into the mud lets take a look at the landscape.
Mortgage financing is offered with options on rates and terms. There are fixed terms which come with a rate that stays the same over the term of the mortgage. You can choose from 1-5 year terms and some lenders offer 7 and 10 years. There are variable mortgages with a rate that is tied to the Prime Lending rate set by lenders which can change throughout the term. These are typically offered for 5 years but a couple of lenders offer 3 years. Fixed and variable rates are set with different parameters and can change at different times. Don’t confuse the two options.
In addition there are different buckets of pricing for these mortgages depending on the type of mortgage (high ratio – less than 20% down) or conventional mortgages (more than 20% down). This can create some confusion for home buyers and owners.
Always talk to your independent mortgage broker about the best options for you. A Google search may only make it worse as you will see offers you may not be able to access.
Now for the mud…
March 4th 2020 the Bank of Canada announced it would lower the overnight lending rate by .5%. That is the rate at which banks borrow money. The Prime Lending Rate is set by all lenders above that overnight lending rate. Once the Bank of Canada lowers their rate typically all lenders will lower their Prime Lending Rate. That rate (now 3.45%) is used to set pricing for variable rate mortgages and lines of credit.
Over the past few weeks the 5 year fixed rates have dropped due to the bond yield. This is happening in part due to economic and environmental conditions worldwide which is impacting the markets. This first week of March is now seeing some significant drops in the 5 year fixed rate with the greatest drops in rates for high ratio borrowers. Finally something for first time home buyers to get excited about!
These lower rates may not last too long. It may be a good time to look at a rate hold before rates move up again. So if you are looking to buy a home or investment property talk with your independent mortgage broker.
If your mortgage is up for renewal don’t sign with your lender, talk to your independent mortgage broker to see what is out there. If your mortgage is up for renewal even next year – look at your options today!
So what the heck is happening with interest rates? It is a bit crazy out there but this could mean an opportunity for you to save thousands of dollars over the life of your mortgage.
Stay calm and call your independent mortgage broker.