With the Bank of Canada making historic changes to its overnight rate and the impact of COVID-19 on financial markets, fixed mortgages rates have been rising and falling like a yo-yo.
“Rates were low because the yields on five-year mortgage bonds were low,” says Mark Herman of Mortgage Alliance. “The COVID-19 crisis caused a spike in the cost of funding mortgages, which caused the rates at the banks to increase. Today, the yields are still low and as the cost of funding slowly gets back into line, rates are correcting downward again.”
To leverage this unique situation, Herman advises getting pre-approved at lower rates and renewing mortgages early.
“Depending on what their rate today is, they could save thousands of dollars,” he says. “Anyone about to get into buying a home should get a pre-approval with a broker. Brokers can time the bottom of the rates. Brokers typically get early notice of the rates going up. If the customer has their file ready with the needed documents in it, then the broker can put in a rate hold when we get notice of the rate increases. This is a fairly rare instance of us knowing rates are going to yo-yo for a while, so buyers and existing mortgage holders can really take advantage of it.”
Herman also advises to defer your mortgage only if necessary.
“We’ve had lots of questions about deferrals,” he says. “We recommend to continue to pay your mortgage if you can. Any deferred payments will have interest charged on the interest and we think it may take away your chance of getting a competitive rate on your mortgage renewal when the existing term is up.”
Copyright Postmedia Network Inc., 2020
