A Rate War on Canada Day?

I’ve never seen more competition with mortgage rates in my 30-year career than I have in the first five months of 2019!

Rates are under 3%!

On May 10th, a new jobs report was released by the federal government showing 106,000 new jobs created in the month of April. This blew away all expectations. And, the reaction was immediate, including higher mortgages being imminent and a bull stock market on the horizon… and yet, this didn’t happen.

Even this unexpected positive economic news could not stop the more common belief that our economy and the economies of the world were not on fire. This was most likely a one-time thing.

The following week, we didn’t see the normal rate spikes that would typically follow this positive economic news. Instead, we saw wholesale mortgage rates drop a little further. This is due to lower bond yields, which lead to lower fixed-mortgage rates. Lower yields reflect reduced investor confidence in Canada. Bad news for Canada, but good news for mortgage consumers.

It wasn’t long ago that some experts said we would never see mortgage rates below 3% and that rates could spike up 1%, 2% and ever 3%. Well, they were wrong. Rates have come down by around 1% since the start of this year. We can’t control where rates are going, but we can jump in, whenever possible, and take advantage. More money in borrowers’ pockets is so much better than in the hands of the banks or government.

MY RECOMMENDATION

Today we’re seeing continual interest rate changes, which is causing some panic. Mortgage borrowers often don’t know which way to turn. Should you go fixed? Variable? Short term? Long term? Or maybe an extra long term like a seven- or 10-year fixed?

My answer is always the same. Take a pause to review your own personal situation. What are your plans? Are you selling in the next few years? Is there a big expenditure coming up, like a home reno, assisting kids with university or college tuition? Are you planning to sell and buy in the next few years? Is your job secure? Do you need a line of credit for investments or emergency purposes? Will you be able to qualify in two, three or five years? Should you be planning for, and obtaining, a credit approval today for five years down the road? A little planning will go a long way.

THE OLD BAIT AND SWITCH ADS

Don’t let low-rate ads sway you. Yes, rate is important and a low rate is great… but choosing the wrong product, term and lender will cost you dearly. I’ve written about many examples of such experiences here. A $1,000 or $2,000 upfront savings is not worth a $10,000, or $20,000 expense down the road. It’s simple math.

I’m getting so many inquiries about the advertised rate specials that are flying around social media, major news sites and other mortgage information sites. Pause and speak with an experienced Mortgage Broker who will listen to your needs, assess your situation and offer guidance into the right products.

Happy Canada Day! Get out and enjoy this fabulous weather while you can!

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