On July 12th, for the first time in seven years, the Bank of Canada increased the overnight rate by .25%, withdrawing some of the stimulus that was needed after the oil price collapse and 2008 financial crisis.
Like many, you may have taken advantage of the low rates and invested in the real estate vs the stock market while money was cheap to borrow. We are still in an ultra-low rate environment and an incredibly stable market. Keep in mind this is a relatively small increase, and we have seen rate increases before that are quickly followed by decreases.
Whether you took advantage of the ultra-low variable rates or a fixed rate mortgage, here is what this increase means for your investment:
Any variable rate mortgage or lines of credit are going to see a slight increase, the amount your payment changes will be modest, however, if this uncertainty is keeping you up at night or those extra dollars are difficult to find in your budget, then you should talk to a mortgage professional about your options.
For those of you that went with a fixed rate mortgage, you won’t feel the rate increase until it is time to renew, however, fixed mortgage rates have been trending upward for the last several years. If your mortgage renewal is coming up, don’t feel rushed or pressured by your institution’s fancy letters or constant calling. You also don’t have to wait for your mortgage to mature, if you are currently more than half way through your existing term, and definitely if you are within a year of maturity, take advantage of this time to check your options. You could be better off early renewing and not waiting for the mortgage rate at the time your mortgage would mature.
Don’t jump into the housing market just because rates may go higher, but If you are financially ready you can get a pre-approval and take advantage of a rate hold.
Don’t automatically take the rate you are offered by your existing mortgage holder. Explore your options and have confidence in the plan you choose, and if the mortgage you have now is not effectively working with your retirement plan, it may be time to look at other options.
It can pay to book an appointment with a mortgag professional, to have a quick look at where your oney is going, discuss what interest rates are up to, and determine if you are getting the most use out of your mortgage features.