When should I lock in my mortgage rate in 2018?
By Roy Cocciollo
The key question for mortgage borrowers is whether rates will rise this year, and by how much. Since the majority of Canadians opt for five-year fixed-rate mortgages, let’s look at the trend:
1. Five-year fixed mortgage rates bottomed in the low 2% range in the first half of 2017.
2. By the end of 2017, the rates climbed back up to around 3%.
3. This marked the most significant proportional increase that we have seen in fixed rates since the start of the Great Recession.
The question remains, do you believe the forecasts? They are calling for significantly higher five-year fixed rates in 2018. Or do you have some doubts – perhaps forecasters have not adequately accounted for other, more powerful long-term forces, that will put pressure to lower interest rates. Read on…
The powerful forces are: demographics, debt levels, and technological change, and these forces are not going away. Over the next 5 years, we will likely see that the effects of central bank policy-rate rises will be overcome by these forces to keep interest rates low.
In the meantime, however, we are seeing a tightening by central banks in the first half of 2018, that may well push mortgage rates higher for a time.
Also key to remember, our elevated household debt levels are keeping our policy makers up at night and are the reason for mortgage rule changes (the changes were both necessary and prudent.)
With our overall household debt levels at record highs after a decade of rock-bottom rates, an increasing number of highly leveraged borrowers will have difficulty keeping up their payments. Should you lock into a fixed rate if you have a variable rate mortgage?
Bottom line: if you are a borrower and have a variable-rate mortgage or lines of credit tied to the bank’s prime lending rate you may be considering options and thinking about locking in your rate. You need to have confidence in your mortgage plan. Work with an experienced mortgage broker who has access to a wide range of lenders and knows your situation. The right mortgage for you will save you money and stress.
If you have any other questions, give us a call and we’ll walk you through the mortgage process or visit: yourmortgageyourway.ca/get-pre-approved/