Record low mortgage rates…..time to lock in?
As at the time of this blog we are experiencing fixed term mortgage rates that are at an all time low. With Prime rate forecast to rise this could well be the time to lock in.
Prime rate is currently at 3.00% and there are a lot of borrowers who are very happy with their variable rate ‘Prime minus’ mortgages. These borrowers have a rate in the ballpark of Prime minus 0.75% which means that they are at 2.25% right now……undoubtedly a pretty great rate. The problem is twofold in that when your rate is tied to Prime you are vulnerable and ..….how much longer do you have left on your variable mortgage term and what will rates be when it comes up for renewal?
In the past the variable rate mortgage products have usually worked out better than the fixed rate mortgages but the tide may now be turning. Given that The Bank of Canada has already increased its overnight rate 3 times this year by 25 basis points each and many economists believe it will increase by another 1.50% by the end of 2011 it may be a correct assumption to make. If the economists are right, by 2012 the variable rate products would come in around 3.75% if the discounting off Prime rate remains the same. You can currently obtain a 5 year fixed rate mortgage at 3.45%.
Those same economists are projecting even further incremental increases with a Prime rate of 6.00% by 2015 and considering it was 6.00% and higher less than 3 years ago this is not unrealistic to assume.
The Bank of Canada is doing what it said it would: going ahead with rate increases so now might be a great time to consider locking in for a term.
Of course while the case for locking in makes good sense right now it’s easy to see why some people may want to keep their great variable rate. If you are secure in your financial situation and want to continue to take advantage of it then you might just want to let it ride since although the consensus is that The Bank of Canada will increase their rates, there is no guarantee of when.
Hope you find this helpful and if you need to arrange financing please feel free to contact me.
Jerry Sims is a mortgage broker with Ambro & Associates Mortgage Consultants Ltd. with over 20 years of lending, banking and financial planning experience. A highly satisfied and loyal client base can attest to Jerry's knowledgeable, creative and caring service that rises above and beyond expectations. Jerry has worked at several financial institutions in the capacity of loans officer, branch manager and credit manager.
Please feel free to ask John for an endorsement if you would like to know more about my services.
Jerry Sims, AMP
Ambro & Associates Mortgage Consultants Ltd.