Mortgage lenders increased fixed mortgage rates by roughly .20% this week. This was expected with the Bond yields moving up last week. Over the past year fixed mortgage rates have fluctuated up and down by roughly .80% from 3.79% to 4.59% but overall remained flat i.e. the trend has not changed. The question that everyone is asking now, is the trend finally breaking into a upward trend in both fixed and the variable lending rate. This remains to be seen. Just as we think the trend is breaking and moving up we get a bad piece of economic news which corrects the trend.
We do know for sure that interest rates will eventually start to trend up as the economy gets better. It could happen this year or next year.
Right now the variable mortgage on a 5 year term is averaging 2.30%. The 5 year fixed as of today is averaging 4.09% so it does make sense to go variable. A point to remember is that if the fixed rates continue to move up the qualifying bench mark rate (posted rate) for 1 to 4 year fixed and variable terms will increase too (currently at 5.19%). So although a client may want to go variable, the amount they need to borrow may not allow them to qualify for a variable mortgage.
A mortgage pre-approval will lock your fixed rate in for 90 to 120 days depending on the lender. There are some 6 month rate holds available. So not only is it wise to get pre-approved for your mortgage financing to know your borrowing power and cash flow etc but it also protects you against a rate increase.