The holiday season is here! In this post, we cover some festive activities to explore near Halifax for a fun-filled December.
We’re preparing for the Bank of Canada September interest rate announcement, the sixth of the year. After a series of consecutive rate increases, what do we expect to happen during this meeting? More importantly, what will it mean for you and your mortgage? Here’s what we’re anticipating, and what your next steps should be.
What are we expecting?
We’re likely looking at another rate hike from the Bank of Canada next week. The bank has been clear it will keep increasing rates until its inflation target of two per cent is reached, and we are still far above that number. In July, the inflation rate was 7.6 per cent. Inflation is the big reason behind the bank’s aggressive rate hikes, so as long as it remains persistently high, we should expect rate increases.
The good news is inflation seems to have peaked earlier in the summer, and has been on a downward trend since. However, its decline is quite slow, giving the bank motivation to add another rate hike to keep it moving down. We know inflation has been stubborn, as previous rate hikes and a market cooldown have yet to have a major impact. You are likely one of many Canadians who can’t believe their eyes when they buy groceries or fill up their gas tank, so the end of excessive inflation is probably something you’re looking forward to. Unfortunately, inflation will not go down without more rate increases, so borrowers with a variable rate should prepare themselves for the news that their mortgage payments are about to rise. However, we probably won’t see an increase as big as July’s one per cent rise.
Should you make any changes to your mortgage?
If you have a variable-rate mortgage, does this mean you should lock into a fixed rate to avoid further rate increases? You’re not alone if you’re worried about how much higher rates can go before your mortgage payments become too much for you to comfortably manage. Everything is more expensive these days, and we understand the costs of living are adding up in ways we haven’t experienced before. Would a fixed rate be the best move?
It’s true fixed rates are on the decline in anticipation of a recession. However, we recommend most clients stick it out with their variable rate. If we enter a recession, within the next year we will start to see variable rates fall back down. Odds are good that they will end up falling to a lower point than fixed rates, so if you lock into a fixed rate today you may end up paying more than if you waited for variable rates to go down.
Next steps for borrowers
Naturally, it might not be a huge comfort right now to know that variable rates are likely to go down at some point next year. Many Canadians are feeling the pinch now and need some relief. As we mentioned back in July after the bank’s last rate hike, now is the time to tighten the purse strings a bit. It’s not fun to cut back on spending, but if you’re worried about making your payments, budgeting carefully is necessary right now. Focus on your essential expenses (such as mortgage payments, utility bills, taxes, etc), and try to limit your “extra” spending. You can also contact a mortgage broker if you feel you need to change your mortgage terms altogether. You might be able to refinance to extend your amortization period, which means you will pay off your mortgage over a longer timeframe, therefore paying less each month. This gives you some more breathing room with your finances.
Contact a broker
We know it can be overwhelming trying to keep up with the market these days. The changes we’re experiencing are rapid and intense, and borrowers are caught right in the middle of the storm. We’re here to help you with all your mortgage needs to ensure you always have the best product and plan for you. If you find your needs changing, it’s important to reach out to a broker to discuss your options. You don’t have to go through the market alone. We’re always available to guide you so that when we come out of this cycle of rate hikes, you’ll be in the best shape possible.
If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.