Mortgage rates are on the rise and people are wondering what to do.
St. Albert-based mortgage planner Adrianne Miller has been receiving a lot of calls from people who had been on the fence waiting to jump into the real estate market.
“I’m getting a lot of phone calls about that, almost in a panic that they may have waited too long and missed it,” she said.
Her message to those people is that, as of Tuesday morning, only a handful of lenders have actually increased their rates so there’s still time to get pre-qualified at a lower rate.
On Monday three Canadian banks — Royal Bank, TD Canada Trust and Laurentian Bank —announced mortgage rate increases of 60 basis points, or 0.6 percentage points. The increase will see the five-year fixed rate rise to 5.85 per cent from 5.25. On Tuesday, CIBC announced a hike of the same amount.
Regarding the big question of whether or not to lock in a variable rate mortgage, it comes down to an individual’s situation, Miller said.
“Most of my clients are actually choosing not to lock in at this point,” Miller said, because variable rates have far to climb before they match the current fixed rates.
However, the advice is completely different for those clients who would be put in financial danger by even a small increase in monthly payments.
“Those clients ... I’m telling them they need to lock in right now,” Miller said.
Banks typically offer discounted rates so consumers can do better than the posted rates, said mortgage broker Roberta Hardern.
Based on a five-year term, the announced increases will mean about $100 more per month on a $300,000 mortgage with a 35-year amortization, she said.
“In the great scheme of things, I don’t think that’s a lot of money,” she said, pointing out that the current rates are “still phenomenal.”
“For the older generation, we signed mortgages at 10 and 12 per cent, didn’t even blink,” she said.
ATB Financial senior economist Todd Hirsch agreed.
“It’s going to feel a little bit tight for people. We’ve become very accustomed in a very short period of time to having these nice low interest rates,” he said.
He expects mortgage rates to creep upward incrementally over the next year and wind up about two percentage points higher by next year. Even with such a rise, rates won’t come close to reaching the 30-year normal of eight to nine per cent.
“We have to keep in mind, we’re still going to be in a pretty favourable environment compared to historic normals,” Hirsch said.
Even so, he thinks the increase will have an impact on sales of new homes and existing real estate.
“Any time you’re seeing mortgage rates increase, you’re going to price a few people out of the market,” he said.
“I do expect that the housing market will cool off a little bit.”
Anticipation of rate hikes has created a buzz in the real estate market, with people scrambling to get mortgages pre-approved before rates increase, said St. Albert realtor Cindi Knight.
“It’s not like this massive flurry but there’s some undercurrent of people scrambling a little bit,” she said.
