The Great Interest Rate Debate
There continues to be a lot of chatter surrounding interest rates since the Bank of Canada raised its benchmark rate in July for the first time in almost seven years – and then again in September. There’s also speculation that a third rise will come during the next interest rate announcement on October 25.
Yet, despite rates being on an upward trend lately, they still remain extremely low.
In his first speech since the second rate increase, Bank of Canada Governor Stephen Poloz cautioned late last month that there is no “predetermined path for interest rates” and said the central bank will proceed “cautiously” as it assesses economic performance.
Poloz is seeking to balance bringing interest rates back to more normal levels amid the country’s strongest growth spurt in more than a decade, while at the same time not harming economic recovery.
Affordability is about much more than rate alone
It’s important to understand that shopping for your ideal home is about way more than simply securing the best mortgage interest rate. Rate really is the lowest common denominator when it comes to ensuring you’re purchasing an affordable home that won’t stretch you to the end of your financial means each month.
We can help you determine how much you can comfortably afford to spend on a home. Just because you qualify for a specific mortgage amount doesn’t mean you should opt to purchase a property that pushes you to your financial limit.
Lenders look at how much they think you can pay them each month, but that doesn’t mean you can make those payments and still save for retirement, college for the kids and manage to go on vacation every year.
We can help you decide which price range you can afford based on your specific finances and lifestyle.
Homebuyers often ask about mortgage rates because they’ve been conditioned to think that what matters most. While rate is one factor to consider when finding your ideal mortgage, it’s also important to ensure you’re not going to pay extra money down the road, such as added fees to change and/or break your mortgage early.
Most often, the lowest rate mortgage products also translate to the least flexible available options. They rarely come equipped with the desired prepayment privileges and other very beneficial options like porting and transferability.
Often, you end up getting locked into the rate without the ability to refinance and you can only discharge the mortgage if you sell the property.
But let’s face it – life happens. If you suddenly need to access some of your home equity or if you become ill or even separated, there’s peace of mind in knowing you’re in a flexible mortgage product.
Save without giving up benefits
You can still obtain great mortgage savings without giving up the perks of traditional mortgages as there are many ways to earn your own discounts. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical discount of a low-rate product before you know it.
Do you have questions about interest rates or housing affordability? Answers are just a call or email away!
