Canadian Interest Rates May Rise This October
Thursday Oct 19th, 2017Share
Get ready property owners – interest rates could increase this fall. Recent data shows strong growth in all areas of the Canadian economy, including employment, exports and consumer demand. As a result, the Bank of Canada may look to increase interest rates.
Earlier in July, the bank already hiked rates, bringing the benchmark rate from 0.50% to 0.75%. Economists at BMO Capital Markets believe the next rate hike is set for October, and that the benchmark rate is going to move a full percent.
What does that mean for your mortgage?
When the Bank of Canada increased interest rates back in July, there was an immediate effect on mortgages. In some cases, the lowest variable five-year rate the day before the announcement was 1.69%. Just over one month later, that rate has moved up to 1.90%. In the grand scheme of things, it’s not a huge jump, but on a $500,000 mortgage, that equates to $480 more a year between the two rates. October’s suspected rate increase will have a similar impact.
Should you lock in your mortgage rate now?
When interest rates rise, it’s important to assess your mortgage and decide whether you want to go with a variable loan or a fixed-rate. As a general rule of thumb:
• A fixed-rate mortgage is a good option during years when interest rates are expected to rise quickly because you’ll be paying the same rate over your term.
• A variable rate is naturally lower than a fixed-rate upon signup, but moves up and down with the market — it can save you thousands in interest if rates stay flat or move down, but can cost you if rates rise.
If you currently have a variable mortgage, it’s a good idea to discuss your options with your lender.
Should you get into the real estate market now?
If you currently aren’t a homeowner, but are thinking of getting into the market, now is a good time to do so – especially before interest rates increase. Also, with the more balanced conditions within the Greater Toronto Area, buyers have less competition than earlier in the spring – yet another bonus.
Your Mississauga Real Estate Sales Representative
If you need an experienced, knowledgeable and trusting realtor to help you get into the market, find your ideal home and submit a winning offer, please contact me, Deborah Clerk, Sales Representative at Keller Williams Realty, Brokerage, at (905) 949-8866. I love working with all types of buyers, including first-time buyers – let's connect to chat!