Rising interest rates are signs of a strong, growing economy, but they are rarely welcomed when your mortgage could be affected. In a time when about 30% of Canadians have variable rate mortgages and almost half of all Canadian mortgage-holders have a mortgage coming up for renewal in the next year, the volatility of interest rates can be unnerving at best.
Luckily, there are ways that you can feel more secure and comfortable in times of rising mortgage rates. Whether that is changing your mortgage structure or taking advantage of an early renewal, your mortgage broker is there to help protect you against rate volatility.
A variable rate mortgage, as the name implies, is a type of mortgage that does not come with a locked-in interest rate. This means that it is subject to both rising and falling interest rates, usually influenced by the Bank of Canada’s interest rate.
Since the summer of 2017, the Bank of Canada has raised its interest rate from 0.5% to 1.75%. In almost all cases, mortgage rates have increased as a result. People with variable rate mortgages saw their interest rates go up overnight, even multiple times in the last year and a half.
So why would you want a variable rate mortgage? Despite its potential volatility, variable rate mortgages have lower interest rates compared to fixed rate mortgages. While that may sound great on paper, it can affect your monthly cash flow if you are not well prepared.
For those that can cope with increasing mortgage rates, a variable rate mortgage might still be your best choice . However, for those who are budgeting month-to-mont or are reliant on regular cash flow, the guaranteed rate that you secure with a fixed rate mortgage can help you and your family stay prepared, no matter how volatile rates get.
Whether your mortgage term is one year, five years, or even longer than that, you likely have the option to renew your mortgage early . Most mortgages have the option to be renewed up to 120 days before the end of their term.
While it might not seem like a big deal, that window can secure a rate that is 0.25% or 0.5% lower than it might be if you until it automatically renews. Being diligent about when your mortgage is up for renewal and talking to your mortgage broker will help ensure that you get the best rate and save the most money long-term.
It is normal to be uncertain when mortgage rates are rising. That’s why we are there to help you through the process and ensure that you are safe, secure, and you save as much money as you can .
Your 8Twelve Mortgage Broker will go through our step-by-step process with you, getting to know you, your family, and your situation to determine which mortgage is most suitable for you. Get in touch to see how we can help you.
Trust your 8Twelve Mortgage Broker to help you get the ‘best’ mortgage!