As many of you know, the Bank of Canada raised its interest rates on Wednesday, for the first time in seven years. Rates went up ¼% – not a drastic rise, but certainly a sign of change. Experts expect more gradual increases in the coming months, with mortgage rates stabilizing again at around 3-4%.
This is good news for investors and bad news for buyers. It is important to keep these increased rates in perspective. 3-4% is still a historically low rate. No one is forecasting a return to the 18-20% rates of the past.
The rate change is due to the strengthening Canadian economy and concerns about increasing consumer debt. Last fall the banks brought in a tougher stress test for mortgage qualification. In order to qualify for a mortgage at 2.4% interest, you had to qualify for at 4.8%. This measure was to insure that borrowers would be able to make their payments should rates increase.
HERE’S WHAT IT MEANS:
- If you have a fixed mortgage, your interest rate will remain the same until it is time to renew your mortgage.
- If you have a variable mortgage or a home equity loan, your rates will go up, and your payments will be increased.
- Expect another increase in the stress test.
- Expect several more small increases.
- If you are thinking of buying a home – now’s the time. Lock in the current rates for your mortgage but also make sure that you do not over extend yourself. You’ll need to leave room to absorb slightly higher monthly payments.
- If you are thinking of selling a home – now’s the time. There will be a flurry of buyers trying to lock in the lower rates before more increases come. More Buyers = a stronger Seller’s Market and rising prices.
If you have questions about how these changes affect your situation, let’s talk. Call Deirdre Love with RE/MAX of Nanaimo at 250-802-9810