Where are rates headed? Down!

Whenever there’s speculation that the Bank of Canada (BoC) will raise its key interest rate – or rates actually rise – many people are preoccupied worrying about locking in if they have a variable rate or renewing early in a fixed rate.

But, don’t panic! Rates aren’t going through the roof.

It’s important to remember that rates have been hovering near historic lows for years now. And, while they’ve been headed in an upward trend lately – with the last quarter-point increase on October 22nd – they’ve been slow and steady. The key rate has risen a quarter point five times since June 2017.

Rates expected to come down in 2020

Economist Benjamin Tal is forecasting interest rates to drop by 2020 – perhaps even as early as 2019. Remember, what happens in the US will affect Canada. So, we can expect to see interest rates fall in Canada by 2020. And the reasons aren’t too difficult to understand. The government seems to have overshot or overestimated the strength of the Canadian economy.

What goes up, must come down

I’m in variable rate and I’ll stay there. If you feel uncomfortable or simply can’t stomach rate fluctuations, then a fixed-rate mortgage may be your ideal option. Fixed rates are like buying insurance – you lock in to keep payments steady, but this comes at a price, much like paying insurance. Historically, variable rates have proven to be less costly.

Have questions about which mortgage type is best for you? Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca