We hope.
Today's smaller 0.25% may be the last rate-hike gasp from the Bank of Canada. Its policy rate is now 4.50% with bank prime rates likely going to 6.70%.
The more confident we sound about this being the last increase in the Bank of Canada's tightening cycle, the more we hope it sticks.
We didn't want to write another rate-hike blog this January. So much for that New Year's Resolution. But if this IS the last rate hike, maybe we can look to a future where they'll come down again. That seems like a welcome (mortgage) scenario to contemplate.
Last year, the BoC foretold that it might have to raise rates 3 times (we're talking 0.25% increases, the previous 'norm'). They have raised it the equivalent of 17 times.
Most of us understand why, to some degree. Everything about the pandemic wasn't normal, going into it or coming out of it. Home sales and mortgage transactions plunged in the beginning and then went wild, driving up home prices in most places across Canada.
Interest rates were so low, and the BoC said it would stay that way for a while β for a long while. But. Then the economy started up again, with unpleasant economic surprises, like a wallop of consumer demand and world events that constrained supply. Governments were suddenly facing all the stimulus money they injected to stabilize the economy coming back at them through an unprecedented surge in (pent-up) consumer spending.
Transitory inflation decided to pull up a chair to stay longer, then turn into a big, fast-growing tree pushing its way out through the roof. Yikes.
Those with variable mortgage rates have seen major budget changes, and those who chose a fixed mortgage rate also had to pay more or worry about higher rates for their upcoming renewals. Home prices surged and then fell from their peak (mostly, depending on the area). Many first-time buyers have faced challenges trying to enter the market, having to save up for more down payment or find a less-expensive home (not that easy in higher-demand markets).
So here we are, dealing with one more interest rate hike β and a housing future as yet untold. That said, we face the mortgage future and 2023 together.
Those with variable-rate floating payments (ARMs) will have to budget for another increase, though smaller than the past monster hikes we've seen since March 2, 2022. That may be little comfort if you've already hit the top of your mortgage affordability.
We can't say strongly enough how important it is to talk to us. Or your lender (though we can provide options your lender can't).
If you haven't revisited your mortgage needs, don't have a plan in place for your renewal, or haven't adjusted your fixed payment variable-rate mortgage (a VRM through a big bank) β you may find your mortgage goals knocked off target to cost you more.
We may be able to help you switch lenders or products, or help you find the right pay-down strategy, such as saving up to add a lump sum at renewal or changing your payment frequency.
Did you get an ultra-low-rate mortgage through an online-only broker, only to discover you have costly restrictions? Can you even get in touch with them now? We may be able to help you here, too. You don't have to be a client of ours to get our free and helpful advice. There's no obligation, and you may save thousands.
Some of our fixed rates have recently trended lower than our variable rate, which is an inversion of the typical spread relationship β usually, it's variable rates that are lower.
If you have a fixed-rate mortgage coming up for renewal, you may be concerned about how the central bank's rate agenda or other market conditions will affect future fixed rates.
Read more about how watching bond yields can provide insight into rate and market movements.
Our rates are better than your bank, thanks to a volume discount we pass on to you. Our salaried, unified brokers can offer personalized mortgage advice and work to lower your costs, including some fees.
True North rates (through their CMHC-approved in-house lender, THINK Financial) are 0.20% lower on average than big banks and other MFC lenders. It's a no-brainer to give us a call to see how much we can save you.
Here are 12 great tips to help calm your (mortgage) budget woes.
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Learn MoreToday's BoC hike of 0.50% inverts the spread β will you save more?
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