I hope everyone is enjoying their summer break and hopefully now the rain has stopped and sun can shine.
Just wanted to do a quick video email out just to kind of talk about rates and what’s going on in the market right now.
For the last several, several years, we’ve enjoyed a really low rate environment, especially these past two years when COVID hit rates hit the bottom record lows.
So right now, we have seen pricing move. So for those that are in the variable rate mortgages, you may have seen your payments adjust because prime increased.
But I want you to know that rate now as of what is it, July 12, prime is still a quarter percent of what it was prior to March 2020.
So they’re going to do another hike tomorrow (July 13).
I know, unfortunately, but they’re just going to get us up to slightly over where we were at pre 2020.
It’s nothing crazy. I know it seems like a lot, but we are still at record lows for our prime. So the increase in what they’re trying to do is decrease people’s buying power because that is one of the driving factors with inflation.
So if we can decrease the buying power, we can get inflation somewhat down. We’ve seen a lot of demand for, you know, between extra demand in housing, lumber, things that we normally weren’t in demand before with COVID.
We also have supply chain issues. Ukrainian War in Ukraine is impacting things, so it’s been a complete storm. But to see that, you know, Prime’s going crazy and everything, it isn’t.
These are gradual increases. And those that are in variable mortgages, we already kind of accounted for it.
It’s just coming a little sooner than within the five years.
Now, the other thing I want to address is the fixed rates.
So anybody that’s been in a fixed rate currently in a fixed rate, you’re you know, you could be coming up for renewal. You may notice a payment shock.
However, we have different strategies on that with fixed rates right now. They spiked up over the last few months.
One of the reasons is, is that when stock prices increase, bond rates go down, and the bond yields go up. Fixed rates are based on bond yields. So when the stock market went up, the yields went up. And that’s where we seen in the spike of fixed rates.
Now, the market, if you follow it, the market has been going down. So when the stock market goes down, bond rates go up because there’s more demand for bonds. And when those bond yields drop. We’ll see the fixed rates drop.
So we kind of seen in the in June, the fixed rates spiked up. Lately I’ve been seeing the bond yields are kind of dropping a little bit and are fixed.
We haven’t seen as much of a fixed rate increase. We see a few specials out. So my kind of speculation is that over the next year, we are going to see as more lockdowns given, we’re going to see that the fixed rates are going to come down.
So if your mortgage is up for renewal in the year, I would just hold tight and not do really an early renewal right now if you’re in a fixed rate.
Those that are in variable rates and you want to switch right now isn’t the time. We’re kind of waiting for those bond yields to drop down, the fixed rates come down.
And then when it kind of meets where the prime rate or the variable rate and the fixed rates for your remaining term are kind of equal. That’s when we’re looking at converting rate.
Now in the market, majority of people are going into a variable rate because the fixed rates are high. And then when the market does drop, that’s when you convert over.
So there’s a ton, a lot of options.
I don’t want everybody to panic.
We are still at record low rates.
I know when I had my first mortgage, when I got my first one in 2003, I was at 6%. So generally 4% to 6% is what the range should be.
The last 12 years we’ve been support been spoiled with low rates.
One other thing I want to keep in mind is that we are nearing a recession. So I’ve done a couple of blogs and where I have graphs that when we hit a recession, rates drop.
So it’s like, don’t panic, everything goes up and then it goes down. It’s like a roller coaster. But really, don’t be so fearful about it.
And I understand right now it’s hard.
You know, the cost of everything with inflation, it’s going up.
My biggest concern is, like a lot of you that are in variable rate mortgages in a variable rate is that if you ever have to break your mortgage, your penalty is way lower on a variable rate because it’s three months.
Simple interest on the fixed rate interest. Great differential. So if we have to look at a strategy like, say, you have other lines of credit or credit cards and we have to look at maybe refinancing those to get increase your cash flow, then you’re in a better option with being in that variable rate because the penalty will be low on that.
There are tons of options. I don’t want anybody to panic.
The main thing is like looking at if you need to increase cash flow because you have higher consumer debt, reach out to me. Let’s talk.
But I just want everybody to realize right now it’s going to be okay. We’re not even at the numbers prior to COVID, even even prior to like ten years ago. Okay.
So it’s not the eighties.
Yes. They talk about doubling, but really we were in under 2%, between two and 3%. That is super low, people. It’s just adjusting your budget.
Thanks. And let me know if you have any other questions.