Bank Of Canada Hinting That Mortgage Rates Might Rise Sooner Than Expected
Anyone who’s been involved in a Toronto house or condo purchase in the last three months or so knows that the market is very busy. So busy in fact that multiple offers are happening more than 50% of the time.
One of the main reasons for all this activity is the low, low mortgage interest rate. Currently a savvy buyer can arrange a 5-year fixed-rate mortgage for just under 4.0% OR get a variable rate mortgage at prime (currently at 2.25%).
Just a few months ago, fixed rate mortgages were around 4.4% and variables were at Prime + 0.5% or + 0.75% for a 5-year term.
Until now, the Bank of Canada had stated that they would hold the line on raising the bank rate (which directly impacts the prime rate) until the end of the second quarter of 2010. There’s now been some tidbits of information coming from the Bank of Canada governor Mark Carney that they would take into consideration undue rises in real estate prices as a signal to increase their bank rate sooner than planned.
The Reserve Bank Of Australia suprised many economists earlier this week when they raised interest rates and cited ’significant growth in housing credit and dwelling prices’ as part of their justification.
So how can a future Toronto home buyer protect themselves against any upcoming rate increases?
The best way is to get a written mortgage pre-approval from the bank of your choice. That pre-approval should state the maximum amount of mortgage you’re approved for, the rate that’s guaranteed and the amount of time the rate is guaranteed for. Most banks will issue that guarantee for 60-, 90- or 120-days.
Make sure you do it right - provide your bank with employment letters, your last Notice Of Assessment from Revenue Canada and authorize the bank to pull your credit bureau. This way they can issue your full mortgage pre-approval without any conditions in it.
Our Toronto’s Real Estate Team at RE/MAX has an exclusive arrangement with a specific TD mobile mortgage representative where we can get that extended out even further if you’re buying a Toronto house or condominium with one of our Team’s buyer agents.
To get more details about our exclusive 180-day rate guarantee, please email me.
TD Economics yesterday released an excellent report talking about this very subject. To read their complete report, CLICK HERE.