How do today’s interest rates impact your mortgage?

Interest rates in Canada have had an adventurous few years, dropping to rock bottom and shooting back up at a record pace. If you’re involved in the market, either as a home owner or potential buyer, it’s been hard to monitor how rates are changing and affecting mortgages and real estate. Now that we have hit a pause in rate hikes, it’s a good time to review current rates, and what they mean for you!

What are the current rates?

The Bank of Canada’s last announcement was back on March 8th, which was the second meeting of this year. For the first time in over a year, the central bank did not implement another rate hike. This came as a big relief to many borrowers after enduring eight consecutive previous rate increases. Right now, the overnight lending rate remains at 4.5 per cent, where it has been since January. The prime rate is also unchanged, sitting at 6.7 per cent.

In terms of mortgage rates, there is obviously some variation between lenders. In general, however, variable rates are between six and seven per cent, and fixed rates are a bit lower, often between five and six per cent. Since variable rates climb or lower with the overnight lending rate, variable-rate borrowers were granted a break from seeing their payments grow.

Will the Bank of Canada raise rates again?

Much of the Bank of Canada’s rate decisions depend on inflation in Canada. The good news is inflation is finally declining after months and months of record highs. The current inflation rate in Canada is 5.9 per cent, a steady decrease from the June 2022 high of 8.1 per cent. However, inflation is still high in terms of food and housing costs. The bank is keeping an eye on these trends as it makes decisions about how to proceed with interest rates. 

We expect the bank will hold the overnight rate at its next announcement in April. While inflation remains steady, the bank will likely be careful not to rock the boat. Further hikes in the immediate future seem unlikely. However, interest rate trends for the rest of the year are less certain. For the most part, we believe rates will have to remain high for the majority of 2023. Inflation will have to further decrease before we might see any rate drops. 

What does all this mean for you?

If you’re a current home owner…

If you’re a home owner, you probably already pay close attention to interest rates and your mortgage. Still, it can be confusing trying to navigate the language used and what it all means for you. After multiple rounds of payment increases, home owners can take a breath. We don’t expect any more rate increases in the immediate future, so if you have a variable product, you can likely expect your monthly payments to remain steady. 

We understand these are high interest rates, and you may feel worried about your ability to maintain these payments long-term. It’s important to remember that at some point, variable rates will drop again. When they do, you will benefit from lower mortgage payments. If you’re concerned about your mortgage, you may also consider refinancing. This allows you to rework your existing mortgage into a product that suits your changing needs. Before you make any big decisions about your mortgage, make sure you reach out to a mortgage broker to discuss your options!

If you’re entering the market…

Springtime is often the busiest season in the real estate industry, and recent steadiness in inflation and interest rates are improving consumer confidence. This means there’s likely to be an active spring season this year for new home buyers! If you’re planning to buy your first home this spring, you will be doing so in a market that is a bit more stable than in the recent past. This provides you with an advantage, being able to predict the rates you are likely to qualify for, especially if you get a pre-approval. 

Today’s rates do mean you will be looking at higher mortgage payments than in the past. It’s important to properly budget for the expenses of a mortgage and homeownership, and how future rate changes will affect you. Whether we see rates go up or down in the future, you want to make sure you’re prepared for it. With this in mind, you can contact a broker early on to help you navigate the market. As a new buyer, we can provide you with lots of guidance and information to ensure you have the best start to homeownership!

Today’s interest rates are stalled after a long period of consistent growth. As inflation subsides, rates are likely to hold steady, which comes as a relief to all Canadians. However, it’s still easy to feel overwhelmed when dealing with high rates for such a long period. If you have any concerns about how interest rates are affecting your mortgage, it’s important to reach out to a broker about your next steps. 

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.