Variable rate mortgage products are experiencing a growth in popularity, marking a significant trend in the mortgage industry. This growth is attributed to Canadians’ anticipation of forthcoming interest rate shifts this year. Here’s the breakdown of why this is happening and what you need to know about it.
The Bank of Canada’s 2023 activity reveals a busy period, with eight interest rate announcements and three rate hikes. Presently, the overnight rate stands at 5%, marking a prolonged high for this metric. Consequently, homeowners are facing record-high mortgage payments. Despite this, the Bank is content with current inflation trends and has chosen to maintain rates.
The recent surge in popularity of variable-rate mortgage products is linked to the ongoing economic slowdown and the looming prospect of a recession. Forecasts suggest that this scenario could prompt the Bank of Canada to initiate rate reductions. Consequently, those with variable-rate products would benefit from lowered rates, while individuals with fixed rates would retain their current rates.
The question arises: Should you consider refinancing? The answer depends on several factors. While the allure of lower rates is evident, other facets of your mortgage require consideration. Calculating whether the savings from the reduced rates exceed costs incurred by breaking the existing mortgage term is crucial. Opting for a fixed-rate product guarantees predictability and stability in payments. On the other hand, a variable-rate mortgage may appeal to those seeking long-term savings and are comfortable with payment fluctuations.
Seeking guidance from a mortgage agent is essential if you have queries or apprehensions about your mortgage. Despite the assumed halting of rate hikes and potential decreases anticipated this year, homeowners are still grappling with high mortgage payments. Furthermore, many Canadians may encounter a shock during renewal as the renewal rates could surpass their current rates. While rate cuts might alleviate this to an extent, homeowners should brace for higher renewal rates.
Navigating the intricate landscape of mortgages and housing markets can be challenging. However, seeking assistance from a mortgage agent ensures that you’re making informed decisions and staying on the right track.