Mortgage Tips: Are Rates Going Up?

Posted On Apr 08, 2024

MORTGAGE TIPS: ARE RATES GOING UP?

Some stats show YES. I've summarized articles I've read and I suggest reading this.

Current Best Rates
Fixed rates: 4.99% - 5.59% (Avg = 5.29%)
Approx $598/month per $100k (25 yr amortization)  
Variable rates: 6.20% - 6.95% (Avg = 6.58%, Current Prime Rate 7.20%)
Approx $675/month per $100k (25 yr amortization)

The Canadian bond market, which impacts fixed rates, is increasing. Experts advise getting pre-approved for loans and locking in rates.

Fixed mortgage rates might increase due to market changes and government spending, maybe settling around 5.50%. People are buying more gold because they're worried about the economy. If there's a big problem, central banks might lower rates, but that might not help if lending policies tighten.


Running the numbers on fixed vs variable:
An insured variable-rate mortgage (VRM) is currently an avg of prime -0.70%, which is roughly 6.50%. A 5-year fixed is as low as 4.99%. That’s a 1.51% difference.

The Bank of Canada would need about six 0.25% rate cuts for a 1.51% rate drop. We might get one or two cuts this year, maybe a few in 2025, and maybe a couple in 2026.

Even if we have six rate cuts over two years to bring the VRM on par with the fixed, you still paid much more in interest over the next two years. 

We would need approx 10 rate cuts for the VRM to balance with a current 4.99% fixed rate. That's doubtful over the next five years. If the Bank of Canada did 10 rate cuts, the housing market would ignite and we’d have all this rate pain for nothing.

This is the new normal...adjust your expenses accordingly.

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