Should You Lock in Your Mortgage Despite its Unstable Rates?

Maintaining the economic success surge

The fact of an improving Canadian economy and the resultant spin-offs is further highlighted by the job market seeing a growth that has consistently exceeded its projected performances. Furthermore, the previously embattled export-manufacturing sector is displaying positive signs of movement. This all relates to the past examples regarding borrowing money, especially the aspect of home buyers and a preferred variable mortgage rate.

Financial traditions regarding fixed and variable mortgage rates indicate that borrowers, who converted from a variable rate plan during the term, usually paid more in the end. This compared negatively to those borrowers who have initially obtained a competitive variable mortgage rate did not change. In short, if you convert from your variable rate plan now, whilst you may get some immediate peace of mind, history shows that you’ll pay for it in the long term!

Although central bankers can influence interest rates, they do not control them. To be taken into account, are the facts of even the best variable interest rates having been regularly decreased by various long-term issues, for example declining economic growth. Various influences will continue to exert downward pressure on our interest rates in the future. However, that does not mean they will not increase slightly because of financial policy changes, but not to the extent that some borrowers anticipate.

The effects of raising the rates

The raising of interest rates by the Bank of Canada has in some ways created a new financial environment for many borrowers with one of the best variable rate options. This is due to the Bank of Canada not having raised its overnight rate in over seven years, giving rise to many borrowers not having experienced a rate rise. This could be a shock to their financial systems and cause some of them to start viewing with some alarm, rising fixed mortgage rates.

So, where does that leave you?  Should you be a borrower with a fixed-rate, it is more than likely you have already experienced the worst of rate increases. Lenders have now adjusted their pricing schedules because of the fast-rising Government bond yields.

As a possible best rate variable-rate borrower, retaining your present position could be your preferred option, rather than taking the conversion path.  Although the variable rate could increase in the near future, it should not be too severe, but a visit to your mortgage broker could give you further clarification!