Transcript
Hi. It’s been a while since I’ve done a video with a market update. I thought it would be a great time to do one right now.
We are heading into the spring market. Things are picking up. The Bank of Canada has their rate announcement on March 6th.
- The Bank of Canada had their rate announcement today and have maintained their overnight ending rate at 5%. Variable rate products remain the same.
This directly affects the prime rate. Variable rate mortgages are based on the prime rate. Fixed rates are based on the bond yields.
Right now what we’re seeing is inflation has come down. It has been stickier. Largely due to the increased inflation in housing costs. Again, mortgage rates and everything have gone up, rents gone up.
The economy is showing signs of slowing down in a recession. Those [rate] cuts are coming sometime this year, we just don’t know when. One of the biggest driving factors of why we haven’t seen any rate cuts yet is that the US economy is very strong right now. So their numbers are looking good. Ours aren’t bad. Bank of Canada usually starts doing their cuts when the Fed Reserve starts theirs. So it’s just a waiting game.
Fixed Rates
In terms of fixed rate fixed rates, fixed rates are based on bond yields. Bond yields really peaked in the fall. We saw them come down quite a bit, then they kind of stuck, and now they’ve increased a little bit.
Bond yields are impacting fixed rates, and those fixed rates are sticky. We’re seeing right now low fives that are trying to get underneath the 5% mark.
Looking To Buy?
If you’re looking to buy there really isn’t any perfect time. There’s a lot of buyers that are sitting on the market waiting for the rates to drop because they are based on the qualifying rate. They’re kind of maxed out on what they’re buying. When the price drops down, they can buy a little bit more.
It’s kind of a Catch 22. Prices did drop in the fall, but with rates increasing then we’re going to see a lot more bidding wars happening out there. And I’ve had a few clients, been in a few multiple offer situations.
It’s a wait and house prices go up or go at today’s rates and get something a little lower. It all balances out in the end.
Renewing This Year
If your mortgage is coming out for renewal, don’t panic. There are a lot of solutions that we can look at. If you need to do a straight transfer renewal, we can qualify you at the previous or at the contract rate, not a higher stress test rate.
I’m working with clients to increase their cash flow. And there’s different ways that we can look at it. We can look at refinancing and paying off any higher interest rate debts, and then using those extra payments and lumping them down on the mortgage to get that amortized amortization and payments where they want to be. There’s just a ton of different options, so don’t panic.
Yes, your payments are going to increase. It’s better to start planning now and knowing where you’re going to be. And what you can do to increase your cash flow.
If your banks are saying, “hey, renew right now” and you have another three or four months left. Don’t do that. As a broker, I can do rate holds. And you might as well hold off on that lower rate until you know your actual renewal [rate].
And a lot of times, if rates do drop, we can get those rate drops. If rates do increase, we do have that hold. So don’t panic.
There’s a lot of different things in that economic world that impacts rates. If you’re expecting rates to drop under 4%, it’s not going to happen. It’s a new reality. It’s one that I’ve had to swallow.
Since I’ve started my career, since 2010, there has been nonstop talk about getting rates into the four and 5%. Now they’re here. I do, unfortunately, think they’re going to be here to stay. I just remember when I got my first mortgage back in 2003, the rates were, I think, like 6%.
The best thing is to accept where it is. Know your options and plan for it. And don’t panic. If you have questions, just give me a call and we can talk.