In Canada, the current housing market is facing a unique situation where increasing interest rates have not caused home prices to fall. Nivrita Ganguly has the details.
Whether you’re renewing, refinancing or buying a home, the strength of your credit profile, how much you put down upfront and even the closing date on your purchase can affect the rate you ultimately secure, he says. A variable mortgage rate rises and falls immediately in line with the Bank of Canada’s moves because they’re typically calculated as “prime” plus or minus a certain amount. For instance, if a homeowner has a variable-rate mortgage of prime minus 0.5 percentage points, their effective mortgage rate would be 6.7 per cent today.
“These circumstances, sentiments and impacts really generally happen prior to a Bank of Canada rate increase or decline,” Dasgupta says. However, many rates on two- or three-year terms are actually higher than the five-year fixed options right now because of anStory continues below advertisement Though homeowners with variable rates have faced the most immediate pain in the current rate hike cycle, these mortgages can provide relief as interest rates ease and also tend to have more flexible terms when it comes to breaking the mortgage.Protesters release mice painted colours of Palestinian flag in U.K. McDonald’s
The mortgage stress test, which applies to all federally regulated lenders, means that those taking out a new mortgage or looking to renew with a new lender have to qualify for their mortgage at a rate of the contract rate on offer plus two percentage points.Many Canadians are therefore forced to qualify for mortgage rates of more than eight per cent currently, boxing some out of the housing market entirely.
If you can secure a mortgage offer at another lender and present it to your bank, that could elicit a better offer, Tran says.