We saw fixed rates rise across the board over the past month, going up by about 0.1%- 0.4% depending on the lender. These increasing rates also come at a time of growing concern about Canadian’s record debt levels, and just weeks after new mortgage rules were announced. Most economists agree that the upward rate trend will not end any time soon. Chief economist at TD, Craig Alexander, said that the rise in mortgage rates can be linked back to the growing expectations of inflation in the United Stated and strong indicators for U.S. economic growth.
Edmonton Mortgages interest rates are still relatively low by historical standards. The current 5-year fixed rate is still about 1% lower than last April when we saw the debt crisis hit Europe. Economists suggest fixed rates could rise by about 0.65% over the next year. Prime rate will also have to go up eventually and a 1% increase is not an unlikely prediction, so be ready if you have a variable rate mortgage or line of credit. Keep in mind; unexpected events can have an impact on these predictions.
Whether you own a house or are looking to buy, rising mortgage rates affect you directly. If you are looking for a home, you benefit from low rates right now. Options are to buy now to lock in manageable mortgage payments for a while, or risk higher mortgage rates while hoping housing prices will fall. If housing prices do fall, which the Canadian Real Estate Association has projected will happen throughout the country, rates are still going up, which means higher interest costs over the life of your mortgage term. Most economists and real estate professionals I talk to say now is the time to buy, don’t hold off on hope that prices will decrease.
What if you already own your home? You will have to renew your mortgage term eventually. If you took out your mortgage recently, your best bet is to pay as much onto your principal as you can as interest rates could potentially be 3% higher at renewal date than you are paying now. That increase makes a big difference on your mortgage payment, especially since you pay the most amount of interest and the least towards principal in the first 5 years of your mortgage. People further along in paying off their mortgage won’t be hit as hard when rates rise.
When the Finance Minister announced changes to the rules on insured mortgages, the projected impact will essentially have the same effect as rising rates. Both will increase your Edmonton mortgage payment. For example, if you had a $300,000 mortgage with a 4% interest rate, monthly payments would increase by $104 if you had to lower your amortization to 30 years from 35. That is equivalent to a rate increase of 0.56%. Despite these upcoming changes and the predicted rising rates over the year, the housing market is predicted to stay stable, not a big increase and not a big decrease.
If you need an Edmonton Mortgage Edmonton Home Equity Loan or just need Alberta Mortgage Rates please call us and we will answer all your questions.
