Bank Rate Goes UP – Residential Mortgage Rates Stay Put
“The Anticipated Bank of Canada Rate Increase Does Not Impact Residential Mortgage Rates”
The much anticipated Bank of Canada interest rate increase took place as anticipated on June 1, with the central bank rate moving up from 0.25% to 0.50%.
At the same time, the long term bond rate dropped, providing some mortgage providers to actually drop rates.
It is very uncommon for short term rates to rise while long term rates are falling, but we live in strange times to say the least. All the financial fallout in Europe has pulled down the bond market which provides mortgage lenders with a lower cost of capital.
With more global economic uncertainty, the seems to be the same upward pressure on interest rates that we were seeing just a month or so ago. While near terms rates are still very possible, there seems to be a growing possibility that rates will not move any further for the foreseeable future.
So with all of that said, what does it mean to residential mortgage holders that have variable rate mortgages or that are looking at fixed rate products.
The continuing message is to make sure that you are aware of what your cash flow is going to be able to handle. If you’re like 33% of Canadian mortgage holders that are taking advantage of variable interest rates, the prognosis for variable rates to stay low are pretty good. But even small movements in mortgage rates can be more than some cash flows can handle. So make sure you have a good grasp on the wiggle room you have in your monthly cash flow so you can proactively project how much of an interest rate increase you can sustain before it starts to impact your monthly payment requirements.
One thing is for sure, rates are going to continue to ebb and flow, based on a lot of things we have no direct control over or even understanding of, like the financial dynamics in the European Union.
Hopefully the current run of low mortgage rates will continue. Just make sure you can adjust to higher rates if and when they occur versus just hoping that they won;t.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel