Variable Mortgages Rates Have Been Coming Down But Could Prime be Going Up?
Variable Rate Mortgages Have Been Coming Down But Could Prime be Going Up?
Up to now we have been hearing and been told that the Bank of Canada would likely keep the overnight lending rate and therefore likely bank’s prime rate, unchanged through to June of 2010. The pricing of a variable rate mortgage has also been improving over the last several months, not through reductions in prime, but through reductions in the adjustment to prime (e.g. “prime + X”). So, when put together, it has created compelling reasons to choose a variable rate mortgage provided one is OK with the nature of such a product.
We have always known that economists and industry experts can change their forecast as well as decisions on what and when action should be taken. So, although inflation remains a low risk in Canada still (a factor that if increased would likely trigger a concurrent rise in rates) the strong activity in home sales and resale prices could cause the Bank of Canada to raise rates earlier than previously planned, particularly if the pace of both is maintained or increased.
Some experts feel however, that the recent high activity and the rise in values is a temporary blip and partially the result of buyers who have been looking for some time and wanting to take advantage of the record low rates and increased affordability. However, they see this leveling off soon based on the price increases as of late and the market not yet fully out of the woods. So, the feeling is that although we have experienced very positive activity, it will not be significant or last long enough, just yet, to cause an immediate change.
The message here to me though is, stayed tuned and keep your eyes peeled. As mentioned before and should be constantly reminded, rates are at record lows and they cannot stay here forever or even last much longer.
For more information on rates, help with selecting the best product for you, or assistance in running some numbers for you, please just let me know.
(604) 603-2520 | Maury@MauryLum.com | www.MauryLum.com |
