As you have no doubt read, we are in for some prime rate changes in the coming months. Those changes are expected and required so the Bank of Canada to slow the rate of inflation and manage economic growth.
Contrary to some media reporting, neither the current inflation rate nor the changes to the overnight rate mean the sky is falling. It’s just the way things work. The inflation we’re seeing at the moment is part of the recovery cycle from the pandemic. Uncontrolled inflation means goods become too expensive for people to purchase. Heavily increased rates means the economy is stalled ( inflation rate cools) and jobs are lost.
It’s all about managing a balance between the two.
For those purchasing a home at the moment, it means that you are competing against any number of people wanting to time the market and get in before rates go up. Rate increases and perhaps the soon- to- be introduced recission period will cool the ardour of those buyers. We should also see more properties coming to market for Spring ( this is already happening in my neighbourhood ).
If you’re looking now or thinking of looking soon, remember as well that minor rate changes will likely not affect the amount you qualify for.
A couple of other things, ‘rate wise’ to consider as well;
1) Over the last decade, because of low rates, you’ve been able to pay off 16% of your mortgage over the first five year term versus that same financing in the 90’s when you would have paid of only 7%! Small increases will not impact this.
2) If you’re in an adjustable/variable rate mortgage, your payments may increase with prime rate increases, but you will continue to save over fixed rates, both in interest rate and cost (penalties) to exit your mortgage.
If you want to chat further or have any questions, give me a call anytime.
