2022-03-07 | 06:32:20

As predicted by almost everyone, the Bank of Canada raised their ‘overnight’ rate by .25% last week, which has led to all of the banks to increase their ‘prime’ rate to 2.70% from 2.45%. A variable rate mortgage of $350,000 with a 25 year amortization will see a monthly payment increase of about $40. With rising inflation being the central issue, we could see more prime rate hikes spread throughout 2022.

I just want to remind everyone that staying on the variable rate is almost always the less expensive option over any short term or long term.

The question I have been asked most over the last week is about the effect on interest rates of the ongoing tragic war in Ukraine. While the prime rate (which affects variable rate mortgages) will still likely increase somewhat this year to try and get control of inflation, the fixed rates should actually come back down a little off of their increases of the last six months. The 5 year Government Bond yields have dropped by .30% over the last three weeks and these yields are a very good predictor of the direction of fixed interest rates. We have seen this happen a few of times over the last twenty five years where prime rate is on the way up and fixed rates actually drop. Just remember not to confuse the two.

The only reason to switch to a fixed rate is if you are going to experience anxiety every time you hear that interest rates are moving up. Five-year fixed rates are around 3%, which is still historically low and below current levels of inflation.

As always, please feel free to call or email me anytime about your mortgage. 

Thanks, Patrick

(905) 299-4665