Discussions from the Bank of Canada have indicated that rates will not be moving on up any time soon or the near future. Because of this prediction, this very well can keep the booming purchases happening in the GTA. Most economists say the recent boom in the housing market was due to the recent rate hike that went to almost a 1% interest increase in fixed rates. Because these rates spiked, at what seemed like an overnight pace, many individuals were jumping to keep their pre-approved rate that had a 120 day rate hold. This was the previous 5 year fixed at 2.89%. However, because of the indication the Bank of Canada has been making as of late, it seems as if rates will not be going anywhere. Obtaining a variable rate mortgage or even a fixed does not seem like a dangerous scenario in the future.
Because it seems these rates have recovered rather quickly, this may worry the Finance Minister of Canada, Jim Flaherty causing him to tighten the mortgage lending rules once again. Since rates are predicted to stay at a low, there would no longer be a frantic hurry to purchase. This causes the question, will this slow the housing market once again? Regardless, if lower rates do not keep the housing market booming, tighter mortgage lending rules enforced by the government will.
Currently long term mortgage rates have not followed current reductions in bond yields, persuading people to go with variable instead of a fixed as it is lower. Currently, the best variable rate is 2.4% (Prime minus 0.6%) for a five year term and the best fixed offered is 3.34% for a five year closed. However, banks are offering their 5 year fixed at 3.89%. When you have fixed and variable at a difference of 1% between the two, that is when people start to opt for the variable instead of the fixed. Also, because of the news that variable is not going anywhere for a while, may entice people to stick with a variable rate mortgage instead of the typical 5 year fixed.
Once must always keep in mind though, you do not have to put all your eggs into one basket. You can always ask your broker if there is an option to go half long term and half short term (split into two products, a fixed and a variable). That way, you get the best of both worlds.
Contact Robert Clancy today to take advantage of the great variable rate mortgage options available!