The Government of Canada has signaled that we are in for a number of rate hikes in 2022, potentially starting as early as March or April. While the number of hikes, and the the ultimate rate increases are up for debate, the fact that mortgages are going to get more expensive is not.
So what can you do protect yourself if you are thinking of purchasing a property in the coming months? You can lock in a rate hold today that will protect your rate for 120 days.
By locking in a rate today you are not committing to that particular rate or mortgage, you are simply protecting yourself from any upward rate changes in the next 4 months.
Fixed rates have already increased by almost half a percent over the past 30 days and they will be facing further upward pressure in the weeks and months ahead.
For example sake, a .5% increase on a million dollar mortgage equates to about $300 higher payment per month, and about $25,000 of additional interest payments over the 5 year term of the mortgage.
While variable rates only increase as the Bank of Canada increases it’s rates, the discounts that lenders offer can change at any time. For example, you can currently secure a prime – 1% mortgage, (prime is currently 2.45%) meaning you can secure a variable rate mortgage today of around 1.45%.
Having said that, the banks can adjust the discount to prime at any time, meaning in 30 days you may only be able to secure a prime – 0% mortgage which would equate to a 2.45% rate instead of the 1.45% you could secure today. The same goes for the fixed rate mortgages which can rise even if the Bank of Canada rate remains unchanged.
The moral of the story is simple… secure a mortgage rate today in order to protect yourself for the next 120 days. Get started by completing the form above!