Upward Pressure On Fixed Rates
“Recent Economic Activity And Reports Could Push Fixed Mortgage Rates Up”
The five year bond rate was on the way up last week.
The most recent job report provided better than expected news about the creation of new jobs in the current economy, putting still more upward pressure on 5 year bonds.
What does this mean for a mortgage holder?
Mortgage financing companies make their money on a spread or profit margin between their cost of money and the cost they lend it out to you. In order to maintain their profit spread, they increase their lending rates when their cost of funds goes up. The current financial market indications are that their cost of money is in the process of going up.
While the money supply dynamics are much more complex that what I just stated, when key economic indicators are moving up like job growth and the 5 year bond rate, there is a growing possibility that the cost of borrowing in the Canadian residential mortgage market will also increase.
In the short term, there is little to suggest that short term rates are going to be changing, but then again…
The near term risk if you will is that long term rates are going to rise.
So if you’re considering a long term mortgage rate for a new purchase or refinance or interest term renewal, then now might be a good time to go through the exercise of seeing what’s available and what will provide the best fit for your mortgage requirements.
One of the best strategies to take to protect yourself from interest rate increases during a decision making period is to apply for financing and get a 120 day rate hold. This will give you time to figure out what you want to do and also to see where indeed the market is headed in the short term. One great thing about a rate hold is, if in the unlikely event that rates went down in the near term, you could still take advantage of that was well.
The best approach to working through a residential or commercial mortgage rate decision is to work with an experienced mortgage broker who can walk you through the different options and strategies that are available to you.
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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