Transcript:
There’s been a lot going on. 2022 is going to be a textbook year.
We had a lot of things going on in the geopolitical world that we had no control over. No control over the war in Ukraine; we had no control over the world being shut down, where a lot of things were delayed for shipping; we had no control of the dollar value, which has caused a lot of our items to be higher prices because of the import costs.
There’s been a lot.
Fixed rates and variable interest rates are based on two different things. The variable rate is based on Prime. The Bank of Canada has been hiking Prime. One reason why the Bank of Canada is doing these hikes—and we’ve seen a lot of them—is that they’re trying to create a pullback in the market.
They’re trying to get people to slow down buying. When you could buy things at an interest rate of 2%, people are just going to go out and buy it. But now when you’re faced with a higher percentage, it’s slowing things down.
Trends show from the past all the times that the Bank of Canada has done hikes in previous years—80s, 90s, 2000s—on average 6 to 8 months after the last hike is when we start seeing cuts.
We don’t know what the cuts are going to be because we can’t predict what’s going to happen in the world. But if we look at the past trends, we’re going to see rates coming down.
The Fed Reserve, the Bank; they’re not going to tell you this. They don’t want to tell you that rates are going to come down. They don’t. And also, we can’t really 100% predict it. But if you look at the past trends, the prime rate usually sticks on average 6 to 8 months after the last hike. There is a cut. So we’re looking at possibly, you know, summertime next year (2023).
Now the Bank of Canada is looking at doing another hike—which they did on December 7, 2022, by another 0.5%.
Yes, I know it’s been a lot, but hang in there.
Now, with fixed interest rates, I find spike up right before the Bank of Canada does their announcements, even though they’re too independent, I find that they’re increased.
So last time a lot of banks were calling people saying, “hey, we knew they’re doing this,” playing on the fear of Bank of Canada doing a rate hike. So a lot of times people are freaking out because their payments are jumping up.
What I noticed after about a week after the last Bank of Canada hike, when things calm down, fixed rates were going down. Lenders were offering some specials. So that’s where you should have a real look before you switch to a fixed rate. I don’t want your equity to be eaten away by a large prepayment of a fixed rate.
So there’s a lot of things going into fact with it. It’s not black and white. Please listen to a trusted mortgage broker because we don’t work for the banks. We’re kind of giving options of what we’ve seen historically, we hear the talk. Because what you get sometimes, hearing in the media is not necessarily what could happen. We’re looking at historic things.
And right now we have hit a historic year of madness of interest rates.
Believe it or not, they are way lower than what they were years ago when I had my first house in 2004. My interest rate was 6% and that was a fantastic rate. We’ve just enjoyed it.
I know that even if you’re experiencing variable rates like, hang on, we’re feeling some pain, we can’t predict the future. But my strategy is that I want to have an outlook where people have flexibility later.
The hardest thing for me when I’ve seen during COVID; the fear behind it, the fear that they didn’t know what they were going to do with their jobs because that’s when they’re at home. The fear of everybody also reacting and getting deferrals on their mortgage, people having to sell. People paying like they were in a fantastic rate, 3.59%, well when the interest rates dropped down to the low twos. All of a sudden, their prepayments were really high because it was an IRD calculation.
So everything in life is changing. And for me as a broker, I really try to look at the best options, try to get some foresight of what’s going to happen. And I know. I’ve had the tough calls lately where I’m getting people that are like, “we don’t know how I’m going to afford when our mortgage is up for renewal, paying $800, $1,200 more a month when we’re barely getting by.”
Those are very hard calls.
My thing is a broker is trying to look at an exit strategy later if you have to get out.
And I know there are a lot of fears and most of us grew up in the 80s and 90s. I know what it was like.
We’re not facing right now the rates that they were back then. We’re not faced with rates at all 11%. We’re right now mid-fives for fixed rates, even in the variable rates. That’s what they were at, not even 20 years ago or 15 years ago. I’m losing track. I still think I’m young!
Know that I’m here and honestly, trying to find the best thing. And it’s been hard. It’s hard when I hear what people are facing. How I like to deal with my business is making sure at the end of the day I’m doing the best and helping you guys look out for the future.
Because I see it. I see that most people will break their mortgages at 39 months. I just don’t want people to lose all their equity.
If you want to talk about some options for your mortgage in 2023, especially if you’re renewing in the next 6 months, please give me a call.