10 Mar

Now That Rates Have Dropped, What Do I Do?

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According to Tim L. Walker, Faris Team Real Estate Brokerage’s In-House Mortgage Broker, here is up-to-date information on the interest rate being cut to 1.25%. If you haven’t read our blog about the Bank of Canada’s recent interest rate cut, you can find it here.

Fear of the economic impact due to coronavirus pushed the Bank of Canada to cut interest rates last week in an attempt to stimulate spending and curb the dramatic downturn in the financial markets. The impact on mortgage rates in Canada has been swift and dramatic.

Variable Rates

The first and most direct impact of these rate drops will be for anyone with a variable-rate mortgage or a Home Equity Line of Credit (HELOC); your rates have/should/will drop by 0.5%. If the interest rate on your variable-rate mortgage was 2.95% last week, your next payment should be calculated at a new interest rate of 2.45%. On a $400,000 mortgage, that’s an instant payment drop of approximately $100/month. On that same mortgage with the lower interest rate, an additional $65/month will be going towards principal, which means you’re paying $165/month LESS in interest. A small, but impactful change.

Fixed-Rate Mortgages

While not directly tied to the overnight rate like variable-rate mortgages are, the announcement by the Bank of Canada (in addition to other economic triggers) have impacted fixed-rate mortgages as well. Fixed rates are tied to the 5-year bond yield (that’s as geeky as I’ll get, I promise), and that yield has dropped like a rock in the past week. Fixed mortgages rates have dropped quickly, and based on the bond yield continuing to fall, we may see additional rate drops shortly.

Insured 5-year fixed rates (for mortgages with less than 20% down) have fallen by over 1% in the past year, and by 0.4% or so in the past week alone. A full-featured 5-year fixed mortgage rate can be found for as low as 2.34% right now.

Uninsured mortgages (purchase price over $1M, more than 20% down, or an amortization longer than 25 years) have slightly higher rates but have dropped significantly as well. About a year ago, 5-year fixed uninsured mortgage rates were in the mid-to-high 3% range and now have dropped to as low as 2.59%.

Now That Rates Have Dropped, What Do I Do?

For those who have purchased a property recently and closing is coming up in the next few months, talk to your lender or mortgage broker and ask them to secure you a lower rate. Rates from institutional lenders have pretty much dropped across the board. If your lender doesn’t offer you the new lower rates, feel free to reach out to me directly and we can take a look at what your options are.

For those who are currently in a fixed-rate mortgage, rates have dropped enough that, depending on your lender and penalty, it may be worthwhile to break your current mortgage to secure a lower rate. If you’d like to speak with our In-House Mortgage Broker to assess if it will be worthwhile to break your current mortgage and lock-in new, lower rates, schedule a phone call with Tim L. Walker.

Have questions?

Contact our in-house Mortgage Broker, Tim L. Walker at:

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TIM L. WALKER | Mortgage Broker | M11000308

Anthem Mortgage Group | Brokerage #10294

p: 705.721.4509 Ext 400 | c: 705.321.9542 | e: tim@mortgagetim.ca

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