Well, this would be the first time that we have tried not to talk about something, and we end up in the news talking about it. Twice!
And what’s that thing we try not to talk about?
Rates.
We had to do a little bit of rate talk this year because of the Bank of Canada’s changes to the overnight lending rate.
Interest rates are on people's minds. And really, no one wants to be paying more in interest than they have to. But, the media has a great way of causing people to panic.
Our owners, Paul Bojakli and Todd Fralic both offered great advice to keep the panic to a minimum.
Global News with Paul Bojakli
Excerpt taken from Global News. For the full article, please visit ”Alberta brokers favouring variable mortgages over fixed rates as Bank of Canada raises rates”
“I’ve been getting a lot of calls asking, ‘should I lock in?’ And my answers the same, no,” he said. “Ride it out, the payment is still lower. In some cases, it’s two per cent lower.”
According to Bojakli, variable mortgage rates currently sit at 2.8 per cent. That’s compared to a five-year fixed rate that could vary between 4.29 and 4.99 per cent.
Bojakli says when qualifying buyers, brokers will anticipate rate hikes from the Bank of Canada — calculated using the stress test — which shows what an applicant can afford to buy up to 5.25 per cent.
“You’re there. You’re positioned already for those increases, but keep in mind that it is going to get more expensive to maintain your home,” said Bojakli who anticipates the rising rates will cool off the housing market.”
Canadian Business with Todd Fralic
Excerpt taken from Canadian Business. For the full article, please visit “Rising Interest Rates May Mean Homeowners Need to Sell Their Properties.”
…if Canadian homeowners bought their property when interest rates were very low—such as in the early days of the pandemic—and their mortgage is coming up for renewal at a higher rate, there are options aside from selling.
One option, he says, is for homeowners to adjust their amortization period—the length of time it would take to pay off a mortgage based on regular payments at a certain interest rate. If you are 10 years into your mortgage at renewal, brokers can show you what the payments would be over 20 years instead of 15, for example.
“Most clients want to accelerate their amortization, not wind it back,” says Fralic. “But given the higher costs of not just their mortgage, but almost all things right now, this is an option people may want to consider temporarily until the government gets a handle on inflation.”
Another option is for homeowners with a fixed-rate mortgage to refinance and secure a rate now before more hikes happen. But it’s important to thoroughly consider this option and evaluate your financial situation before making the move.
“If you have one year left on your term, and today’s renewal rate is 1.5 per cent higher, would you be better off locking into a new five-year term today, or take your chances that a year from now rates aren’t 2.5 per cent higher?” says Fralic. “That’s a tough call to make, and most of our clients only think about their mortgage when it’s up for renewal.”