Tuesday, April 6, 2010

What to do about the rise in rates

There's been a lot written in the media lately about upcoming hikes in fixed rates. While it's true many of the big banks have increased their posted fixed rates, if a new mortgage is on your horizon, there's no need to panic.


As of right now, there are still many lenders who are offering rates near historic lows. If you're thinking about buying or renewing in the near future, your best bet is to take advantage of a 120 day rate hold. This feature, offered by many different lenders, allows you to get prequalified at today's low interest rate. If rates go up, you're guaranteed today's rate. If they go down, you get the lower rate.

When it comes to locking in your variable rate mortgage, that question is a little trickier to answer. Many experts believe the Bank of Canada will start increasing its Prime rate in the near future by approximately 25 basis points. If you're in a financial situation where an increase in monthly payments is going to be tough for you to handle, it's probably wise to lock in now. When you lock in, it's important to remember that you're locking into the current fixed rates.

If you can withstand small increases in your mortgage rate, you might want to stand pat with your variable rate mortgage for now. Increases don't come out of the blue since they're tied to the Bank of Canada's prescheduled announcements so it's best to tackle as much principle as possible while you can afford it.

Whatever you choose to do, take note that lenders are particularly swamped right now as homeowners try to acquire a rate lock - or a mortgage before rates really start to increase. If you're buying a home, make sure you give yourself at least seven days to acquire financing.

If you would like advice on the options that make the most sense for your particular situation, please feel free to give me a call.

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