As we saw on Oct 24th 2018 the Bank of Canada has raised their overnight rate again by 0.25%. This making prime at bank’s now 3.95%. TD Canada Trust’s prime is 0.15% higher than other Canadian banks and currently is at 4.10%. With fixed and variable mortgage rates on the rise, here is what you need to know.
Prior to this, the last increase was on July 11, 2018.
Fixed rates have also been continuing their upward trend. This due to continuing bond market increases.
There are many factors that come into account when looking at interest rates and here are some details to assist.
If thinking of locking into a fixed, it's important to know what rates you will be offered if locking in. The best place to start is to call your current lender and ask what your rate options are. From there, the rates can be compared to what your Ottawa mortgage broker can offer with other banks.
The rates you will be locking into will be substantially higher than your current rate. With this, you will want to make sure the new payment, if locking in, fits with your monthly budget. Sometimes holding tight in the variable, even in a rising rate environment, will still save you more. Move savings when compared to if you chose a fixed rate originally or switched to a fixed, when looking at the average interest paid over 5 years, for example.
If not wanting to lock in, it's a good time for a variable rate review. For those with a smaller prime discounts such as prime minus 0.50%, if wanting to stay in a prime based mortgage, it's a good time to see if there are any more competitive variable rate mortgage offers currently. A change from prime minus 0.50% to prime minus 0.90%, for example, may save you quite a bit of money over the rest of the term, even with a penalty factored in.
If you rate was locked in sometime of the last 5 years, it may be best to stay put as your rate is likely lower than what is currently available.
If thinking of porting and increasing the mortgage or refinancing to borrow more funds, the faster you can lock in a 120 day rate hold the better. This will protect you against future rate increases.
Also, if you are up for renewal, once you are within the 120 days of your renewal date, locking in a rate until your renewal is a good idea.
Typically to break your mortgage before the renewal date, even if it's less than a year away, will trigger a larger penalty. If interested to know if paying a penalty and locking in now is a good idea, the best place to start is to call your lender. They will be able to tell you the penalty and than explore rates with your Ottawa mortgage broker.
Whether in fixed or variable, increasing your mortgage payment, if possible, is a great way to reduce the impact of increasing rate movements. From this change, you are now increasing the amount of principle of each payment. That will help reduce the time overall with a mortgage.
Contact me to learn more about fixed and variable mortgage rates on the rise and how this may affect you.