Why Canadian Homebuyers Should Buy Now — The Rise in Mortgage Rates
Recently, an upsurge in interest rates have headed in our direction.
What exactly is affecting our premium low rates you may ask? Many factors are to be determined when analyzing such. A strong economy means more demand for money, when companies are thriving they will pay higher interest to obtain money for their business. That isn’t the case right now as we are living amidst a global pandemic. One which has economies scattering for recovery. As a result, interest rates have been kept low and favorable.
Canadian Bond yields have been hit the highest since last April. Many lenders responded by increasing some of their mortgage rates. Canadian Bonds yields, which leads fixed rates closed at 0.67% on Monday, February 22nd. Funding costs rise as lender margins get squeezed to the point it can’t absorb the increase without passing it onto borrowers. Domestic factors from the south of the border have been the main cause of our bonds going up. It really is a U.S. story with Canada tagging along the ride too. This is due to a growing consensus that U.S. inflationary pressures will rise far more quickly than expected. Simply stated, as governments print more money into the economies with hopes of stabilizing the economy, with the intentions of employment and job creation, the money loses its value to inflation. Hence the outcome of the rise in mortgage rates.
Nothing is certain
Mortgage rates remained relatively low then shot up back in November of 2020 with news of the Pfizer Vaccine performing effectively in trials. This suggests that the economy is to be opened up sooner. However, that wasn’t the case as rates continued to fall up until now. We must remember nothing is a straight line upward nor a straight line downward. That being said, will mortgage rates stay low forever? Definitely not. Competition has resulted in lenders sticking to low rates, no lender wants to be the first to increase their rates, although that has now come to an end. The ice has broken with the rise of rates now among us.
Homebuyers should respond now because it is the perfect time to lock in rates as fixed rates will be going up. Getting pre-approval done and qualifying for a mortgage is of utmost benefit. Although rates have slightly risen, they are still at a historical low. Variable rates are unaffected at this time, to get an advantage in this hot market, get your rate locked in now. The momentum hasn’t stopped. Now is the time to make your dreams come true!
Thank you for reading, I hope you have benefitted from my report. I will be publishing an article every week, stay tuned!
Sajith Reyal
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