Could Mortgage Interest Rates be on the Rise?
Matrix Mortgage Global – Could Mortgage Interest Rates be on the Rise?
The Bank of Canada is scheduled to meet on July 11th, and when it does many analysts are saying that it is likely to raise interest rates. If this happens, it will mark the fourth interest hike in the last 12 months.
Even so, they expect that this will be nothing the Canadian economy can’t handle. For a decade, we have been enjoying ultra-low interest rates, unemployment is low and the economy is strong. For some individual Canadians however, an interest rate hike could make paying off debt more difficult which could result in an increased rate of delinquencies.
Another consideration is that housing prices in Canada – especially in the larger centers like Toronto and Vancouver have been on the decline. While a rate hike may not cause prices to fall more, it certainly won’t help the market go back up either.
What would an interest rate increase mean for Canadian consumers?
Canadian household consumer debt has been a concern for economists for some time. The good news, however, is that thanks to relatively low unemployment and strong growth trends, most Canadian consumers should be able to handle an interest rate increase.
An increase will also likely mean that Canadians will begin to take on less debt. Data from past increases by the Bank of Canada show that debt-to-income ratios among Canadian households general go down when the interest rates go up.
What would an interest rate increase mean for Canadian mortgage holders>
If you are holding a fixed rate mortgage, you will not notice a difference in your payments until you have to renew your mortgage, at which time your new rate could be higher than what you are paying now.
Holders of variable rate mortgages on the hand will notice the increase almost immediately. But even with an immediate increase, however, many variable rate mortgage holders could still be paying less than their fixed-rate counterparts.
For those seeking new mortgage products including first and second mortgages as well as refinancing, a rate increase by the Bank of Canada will make those products pricier. Therefore if you think you may want or need any mortgage products in the near future, it is best to speak with your mortgage advisor at the soonest possible opportunity so that they can lock in a rate for you.
If you would like to learn how a potential interest rate increase may affect you or if you are interested in any mortgage products, call the team at Matrix Mortgage Global at 1-877-388-4058.