Mortgage Rates

by Darrin DeRoches March 15 - 21, 2012

Mortgage rates have dropped to the lowest levels in my lifetime. I had written about the rates in January with the caveat that they were ‘teasers” to get people in the bank and ‘upsell’ them but these current rates are here to stay – for now. The lowest rate posted today on a one year mortgage is 2.69%. No gimmicks, just a low rate you have to qualify for with good credit and a job. All the major banks are at 2.99% for five years with Bank of Montreal leading the pack. The other big drop that is causing people to notice is the 10 Year rate as low as 3.79%. Bank of Montreal is at 3.99% for ten years and this low rate from a major bank is what is really causing a stir.     The low ten year rate is causing such a stir since banks do not lend money out long term to lose. The Bank of Montreal is basically saying they believe that in ten years our economy will warrant a rate at 3.99%. I know a couple who ten years ago signed a ten year mortgage for 6% thinking the rates will rise and they are locked in for a ‘good rate’ and over time they would win. The rates were in the 4% range when they signed and over the course of ten years the rate did rise into the high 5% rates but it never reached 6%. In retrospect they should have never signed a ten year rate since they could have saved a great deal of money over the ten years. So the bank won. The banks always tend to win, so with the major banks posting a 3.99% rate for ten years they are telling us they believe the rates will not go over this rate in the next ten years.      With all of this information, what should a consumer do today? If you have a rental property which you plan on keeping for a long time then sign a ten year mortgage and be locked in at a rate that is going to keep steady at 3.99%. You’ll benifit from your rental income will increasing about 2% a year over the next ten years. If you are buying a new property I would suggest in signing a five year rate a 2.99% instead of a short term 2.79% since you will probably live in the new property at least five years and the rates will be in the mid to high threes in the coming years. All the indicators are there so make an educated decision before signing a mortgage today.      Keep in mind that these rates can be held for at least 120 days so if your mortgage is coming up in the next three months or you are considering on moving or buying in the coming months, go to a bank or mortgage broker and qualify for these rates even if you do not use it – you will be locked into the rate! Last thing, if you are interested in a 0% down or 5% cash back mortgage at 4.73% check around, it’s possible! V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.