Here is a bit of an update on mortgage interest rates. The 5 year bond yield has been increasing which shrinks the spread between the bond yield and the 5 year industry average mortgage rate. When that spread shrinks, that prompts interest rates to rise. We saw one round of increases in the past few weeks and it looks like we are in for another. Some lenders have already increased fixed rates and there will be more following.
On the whole scheme of things, we are still seeing very attractive fixed rates with 5 year terms in the 3.60% range. There are still some lenders down in the 3.39% area but these will disappear quickly if the bond yields don’t turn around.
As these fixed rates increase, it makes a case again to consider variable rates. We likely have some time until the Feds increase the overnight bank rate which gears the variable rates. Lenders have a range of prime plus .20 (3.20%) to prime less .50 (2.50%) for 5 year variable closed mortgages. If you are considering a variable mortgage, our advice is set the payments up as if it was a fixed rate. That way you have extra money going on principal each month and gets you used to the higher payments should rates rise down the road. Also when considering variable, be prepared to pay attention and watch what the Bank of Canada is doing so you can consider locking in if things go haywire. We can help with this by setting you up on weekly email which gives you the interest rates. That way you can see the trends.
If you are considering a new mortgage in the next 4 to 6 months, do contact us here at Invis so that we can protect you from future rate increases. We will help you with the decision as to what type of mortgage is best for you. We are here to help.
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