“Days of Rock Bottom Mortgage Rates Numbered”

I came across the article Mortgages still the story of the day for the big banks in the Globe and Mail. It is a long article and the title of the article seems to not be entirely consistent with everything stated in the article (this seems to be pretty common practice in newspaper articles from what I have seen). The article is rather wishy-washy in how it comes to the conclusion of an increase in mortgage rates, but here is the summary:

• Inflation numbers are higher than forecasted for the year ending February, which could result in a rate hike sooner than expected
• However, it is believed that much of the reason for higher inflation is due to the Vancouver Olympics, which makes the numbers skewed and therefore are not conclusive.
• Spending increased due largely to home renovation purchases spurred on by the impending end of the Home Renovation Tax Credit.
• The value of the Canadian Dollar is very high and strong, which could result in the prime rate, which affects variable rate mortgages, not increasing.
• The increase to prime rate will likely be gradual and measured, and could take a while to increase substantially.

At the end of the day, rates will go up, but it is a question of when which is very vague.

In other news related to above is another article about the manufacturing sector being strong despite the strong dollar. This is the major reason I thought that variable mortgage rates will remain low for the longer term. However, if exports are not being hurt by the dollar, then it appears there are no major obstacles to increasing variable mortgage rates.

It has been my observation that fixed rates can increase quickly, more quickly than variable rates. Right now, fixed rates are about as low as they will get. If you are considering locking into a fixed rate, now would be the best time to do so.

Related to this, the question is; are you in a variable mortgage with a bank or credit union? Many of these institutions will give you a variable rate mortgage at a competitive rate, but when you go to lock in, will lock you in at their “posted” rate, which is often approximately 1.4% higher than the best market fixed rates. If your mortgage lender is not offering you to lock in at a rate anywhere near 4% for 5 years right now, then you owe it to yourself to call me today and get a much better mortgage rate. The great news for you is that variable rate mortgages usually require only a 3 month interest penalty to break the mortgage, which is very inexpensive to do.

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