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Interest Rates Are Rising!

Whenever I have a question about Mortgages, I turn to a trusted professional such as Pat Pelletier, and this is what he had to say about the upcoming rates...


Today, we have heard from 3 major banks that because of pressure in the bond market, they were increasing interest rates on all fixed rate mortgages. On a 5 year term, they have increased by 0.25% or ¼ of 1%.  It is expected that most major institutions will follow suit shortly. So, far, we have not heard that the Bank Prime (which affects Variable Rate Mortgages or HELOC’s) has changed.

The lowest 5 year fixed rates that we have seen in this cycle is the currently available 3.39% fixed for 5 years. It won’t be there for long. Historically and as long as I have been in this business, this is the absolute lowest. I do not expect to see these low rates again.

What does this mean for Buyers?
Naturally, the cost of borrowing will go up and so, therefore, will monthly payments. On a $300,000 mortgage the payments will increase by about $40 a month. Over 5 years, that is a total of over $2,400 which is quite significant.

Buyers will also be affected in their qualification – they will now qualify for less mortgage. A family with gross earnings of $60,000 per year, would qualify for about $20,000 less in mortgage – maybe just enough to postpone their purchase of “the perfect home”.

If you have a pre approval with a certain rate commitment expiry date, and you are close to buying, perhaps now is the time to really find that home. If you don’t have a pre approval in place, please get one now and get a rate guarantee for 90 or 120 days.

What does this mean for Sellers?
This could be a good thing. We have seen in the past on these rate cycles, where when rates go up, there may be a flurry of activity. This may be a good time to meet with your Realtor and make sure you are property priced.

Pat Pelletier
Dominion Lending Mortgages

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