Thursday, January 29, 2015

Should I lock in my mortgage rate due to recent Bank of Canada Rate Cut?

Should I lock in my mortgage rate?

This is a question many ask.

I just posted the article below about the current status of Short term or long term Mortgage Rates



This page is a running record of how interest rates have changed over the past 5 to 10 years and what my personal philosophy is regarding what you should do with your mortgage - namely, should you lock in your mortgage interest rate or should you stay with a variable rate mortgage.  This is the question!

After nearly 4.5 years, the Bank of Canada made an announcement last week that shocked the experts, they lowered the Prime Rate by 0.25%  Nobody was expecting this reduction!  The reasons behind the drop are varied, but the largest reason is that the price of oil is under $50 per barrel and the Bank of Canada performs most of it's forecasting based upon the assumed price at $60 per barrel.  Thus, with low inflation, low oil prices generating lower overall revenue for Canada (and certainly Western Canada) the bank decided to lower the rate.

Read about the current Bank of Canada Prime Rate Update

The major Canadian banks did not immediately lower their prime rates that they charge their best customers.  As a matter of fact, the Banks only lowered their prime rate by .15% and not the .25% that the Bank of Canada dropped the rate.  Bank prime is now 2.85% and mortgage rates for fixed term are nearly the same. 

Many believe that there will be mortgage rate wars over the next few months.  The banks still have plenty of cash to lend so this is likely the case.

We are still at or near 50 year historic lows- meaning, it's still a good time to 'lock in' your rate if you are not a gambler.

Again, please don't forget these are posted rates and often you can get a lower rate than posted if you negotiate.
Variable rates - the banks are posting their rates as prime plus 0.000% and you can likely find prime minus .2%  to prime minus .5% or possibly more

I've written many articles about staying with short term or variable mortgage rates at this page:

My preference for many years (and continues to be) to go variable, but if you are not a gambler, then it could be getting close to the time where you lock in your mortgage.

I recall reading an article the day of the rate cut on January 21, 2015 that not one of the 19 'experts' on the Bloomberg Panel had predicted a rate cut. 

Now if you read about predictions for the March 4, 2015 Bank of Canada Interest Rate Announcements the 'experts' are saying that they expect the bank rate to drop another .25%

Read the article below that just appeared in the Herald about rates, it's very interesting what the experts are now saying about rates.

If you want interest rate security, then you go long term.

If you want to save money, my advice is to go variable, always (at least for the next 1 to 1.5 years).
....and this is still why

The mortgage interest rate debate continues.....

All the best!


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Read this particular post online at this page:

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