We know our new Liberal government plans on spending a plethora of funds for infrastructure and various other projects to get the economy going in full swing. We also know the government plans on running deficits during its tenure in office.
What we aren’t sure of is where interest rates are headed in the near future. There is a close watch on U.S interest rates. According to what we’ve been reading, the American economy is starting to heat up and there have been indications they are looking at an interest rate hike as soon as December of 2015. We always hear of potential interest rate hikes by them but a lot depends on how brisk their economy is. As we know our economy relies heavily on our neighbours to the south and the Asian markets for our exports.
Canadian mortgage rates have crept up but indications so far are that there may not be any movement in the Bank of Canada interest rate until potentially 2017, but that is not a given.
Again this is from information that comes across our desks on a frequent basis. We monitor closely the future forecasts for where economists feel interest rates are headed. As with any forecasts, interest rates can vary up or down but what we do know is eventually mortgage rates will increase. For those looking for a mortgage to refinance, renew or purchase a home, interest rates are still historically low.
Due to the volatility of mortgage rates, you can ensure comfort by locking into a mortgage. If you decide to take a five-year mortgage you will be able to predict what you will be paying for the next five years. This will allow you to budget easier knowing what your monthly expenses are. Should you decide to prepay your mortgage you are allowed to pay anywhere from 10 per cent to 20 per cent once each year without penalty and also increase your payments by up to that same amount. We also know that an existing mortgage can be “ported” to another property without penalty.
In the case of a variable rate mortgage we do know you can have an interest rate below prime, with prime currently at 2.70 per cent. Rates will follow the lender’s prime rate up and down but again, we know eventually prime will increase, depending on the bond market, etc. For example if the lender’s prime rate goes up by 1.00 per cent so will your variable rate mortgage. That would mean if you had a variable rate currently at 2.25 per cent that would increase to 3.25 per cent, which is approximately 0.50 per cent higher than current five-year closed rates.
We all have to carefully watch the media to see where we are heading interest rate-wise. Again we have a new government in place and based on their platform we will have a wait and see attitude as to where interest rates are headed.