This past week provided a dramatic shift in the outlook for future mortgage rates. For the past few months things were very “boring” as rates remained stable and economic data showed miniscule bits of positive news.
However, during the last few days we saw Australia raise their key lending rate by 0.25%, Canada’s latest employment numbers came in six times higher than forecasted which triggered a huge surge in bond yields and this caused RBC to be the first major lender to announce mortgage rate increases of up to 0.35%.
Exciting times. But also a time for all those who’s end goal is to be in a fixed rate product to contemplate locking in now. Due to these developments, the chance of the Bank of Canada having to act sooner just increased. If you recall they made a conditional commitment not to raise their key rate until the summer of 2010. The key word is “conditional” and not a guarantee.
As lending rates are heading up this coming week, RBC announced increases last Friday, now may be time to seriously look at locking in your variable rate mortgage. We have seen fixed rates already rise about 0.35% in the past few months and now perhaps another 0.35%. This would make it a total of about 0.70% in increases on the longer term fixed rates and the Bank of Canada has done nothing yet.
Of course not everyone should lock in. For those that are comfortable with the variable rate, stay in. And DEFINITELY NOT, those who have a variable rate in the “Prime minus” categories. Your rates are just too good to give up despite possible future Prime Rate increases.
For the rest, I believe this is a great time to give it some thought and plot your future.
