The implementation of the new mortgage rules in Canada has changed the entire picture and value with which a borrower can secure mortgage from a lender. Borrowers are critically concerned with how the picture has changed particularly on that area where rates will increase. One of the questions is how much have these rates increased. At present, the previous 2% range has increased to about 3% for five-year fixed mortgages, which have been commonly preferred by most Canadians.
What affects the rate changes?
A change always comes with different factors that can affect the change. In case of the new mortgage rules in Canada, technology, demographics and debt levels will dictate the increase in the five-year fixed rate for this year and for the years to come. The central bank policy rates will surely be affected by these forces in the next five years and these may dictate that the policy rates should be kept lower.
Rates have been tightened by central banks
As changes have been introduced last January 2018, it can be noted that central banks have tightened rates for the first quarter of this year. In the next few months, the rates may become higher especially that household debt reached its all-time high. The number of mortgage borrowers have increased and with these new rates, repayment obligations must be met.
Variable rates and locking in your mortgage rates
With these changes, the question is: When is the best time to lock in on your mortgage rate considering that variable rates exist in the market? Before going into that, let us know more about a mortgage rate lock. This is when interest rates are 'frozen' on a mortgage for a certain period of time, usually 30 to 120 days or even more. Extending the lock beyond what has been stipulated in the contract will mean additional charges that you must pay for.
The mortgage rate lock is the lender's guarantee that the mortgage rate on your loan will remain the same for a specific time frame. You never have to worry even when rates go up in the market and when changes take place from the time you have submitted an offer for the mortgage up until the deal has been closed.
When is the best time to lock in on your mortgage rates?
You have to take note that you cannot lock in the rate until the initial loan has been approved. You can typically wait until you have found the home you want to purchase and have your offer accepted. You may want to erase the worries of locking in too early on the mortgage rate and later on miss the opportunity of having a better rate before completing the purchase. This will also lessen the burden of paying extra for an extension in case the lock in period expires.
Since mortgage rates in Montreal
are variable as of the moment, you should have the confidence on your mortgage loans. It will always be good to talk to an experienced mortgage broker and discuss any possible scenarios that may affect your situation. That way, you will be able to find a mortgage that is best suited for your needs and for your paying capacity. This will save you from stress in the long run too.