Mortgage Rates Rising

by Darrin DeRoches September 5 - 11, 2013

Mortgage rates are slowing creeping up from historical lows. It has been more than three years since we saw any real movement in mortgage rates — so why now? Simply put, bonds yields rise and mortgage rates follow. This is happening because the United States is slowly recovering from their real estate catastrophe and they are taking their money out from Canadian markets where they put it for safe haven. This is the reason that we are being given. You will also hear about how our housing costs are cheap compared to other markets, the market is going to hit a bubble, things are slowing down etc. They will give you 101 reasons why it is rising but the rates have been low for a long time and the big banks are looking for any excuse to raise the rates. One bank did it and the others slowly followed. Last year a bank would raise the rates slightly and the other banks would offer a “deal” to steal some of their business. This year they are going to raise them up to secure themselves against the bond rates.     The next logical questions are how high will these rates go? Again, who really knows, we were all paying up to 6 per cent before the drop. It will take time to get there but it definitely will hit a strong 5 per cent next year. This will not affect anyone who just renewed but if you mortgage is coming due in the next 12 months you may want to look into an early renewal. A mortgage broker can figure out the costs of an “early renewal” and secure you a today’s rate. You most likely will be paying the mortgage over the next five years so if you can secure a lower rate today, the savings will really add up. No one can really predict the future but the rates are definitely going to rise over time. The bank rate will most likely follow this trend upwards and we will be paying higher mortgage rates for years to come. This adjustment will help the loonie become stronger which will only help if you invest in currency or take a vacation in the states.     The American economy is once again costing us money in the costs of our mortgages but it is supposed to strengthen our economy with jobs and maybe we will be able to afford these big houses we bought over the last five years. The other side of the coin is that the prices of our properties will settle and we will be able to get more house for our dollars. We have no control over the economy but we can negotiate the right mortgage to save ourselves money in our homes. If you need advice I can refer great mortgage brokers who can explain the savings to “break” or “renew” your mortgage to set you up before the rates get to high. 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 sold@uniquerealty.ca.