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<h3>Fixed Rate Mortgage vs. Variable Rate Mortgage: Which One is Right for You?</h3>When choosing a mortgage, one of the biggest decisions you’ll face is whether to go with a Fixed Rate Mortgage or a Variable Rate Mortgage. Each option has its benefits and risks, and understanding the differences can help you make a confident decision. Let’s break them down.What is a Fixed Rate Mortgage? A Fixed Rate Mortgage locks in your interest rate for a set term (e.g., 1 year, 3 years, 5 years, or even 10 years). This means your mortgage rate stays the same throughout the term, giving you stability and predictable monthly payments.What is a Variable Rate Mortgage? A Variable Rate Mortgage has an interest rate that fluctuates based on the lender’s Prime Rate. Your lender may offer you a rate such as Prime - 0.50%, meaning if the Prime Rate is 5%, your actual mortgage rate would be 4.50%.Since the Prime Rate can go up or down, so will your mortgage rate—and possibly your mortgage payments.How Does the Prime Rate Affect a Variable Rate Mortgage? When the Bank of Canada changes its Overnight Lending Rate, lenders typically adjust their Prime Rate accordingly. If the Prime Rate rises, your variable mortgage rate and payments may also increase. Conversely, if the Prime Rate decreases, your mortgage payments could go down.For example: If the Prime Rate is 5% and your lender offers Prime - 0.25%, your rate is 4.75%. If the Prime Rate rises to 5.5%, your rate increases to 5.25%, resulting in higher mortgage payments. If the Prime Rate decreases, you’ll enjoy lower payments. How Often Does the Prime Rate Change? The Bank of Canada typically holds eight announcement dates per year where they may choose to increase, decrease, or maintain the Overnight Lending Rate. These announcements are important to monitor if you have a Variable Rate Mortgage.On Jan 29th, 2025 the Bank of Canada has cut its overnight key interest rate by 25 bps to 3.00%.&nbsp;<h3>What influences Fixed and Variable Rate?</h3>Fixed-rate mortgage rates in Canada are priced off of Government of Canada 5-year bond yields that are, in turn, influenced by the U.S. Treasuries. Variable-rate mortgages are affected by the Bank of Canada's monetary policy, namely interest rate hikes and cuts that, in turn, impacts commercial banks' Prime lending rate.Understanding the Prime Rate in Canada: The Prime Rate is the interest rate that major banks in Canada use to set interest rates for variable loans/mortgages and lines of credit. It’s influenced by the Bank of Canada’s Overnight Rate, which is the rate at which banks borrow and lend to each other overnight.&nbsp;Consider the prime rate as the foundation upon which these other interest rates are built. As the prime rate in Canada fluctuates, the interest rate you pay on your adjustable/variable rate mortgage also adjusts accordingly.If you are like me, and you like to look at numbers, here is a table summarizing the Prime Rate changes in Canada from 2010 to today. This table captures the key changes in the prime rate along with the dates and the magnitude of changes from 2010 to today.<table border="1" style="border-collapse: collapse; width: 100%; float: left;" data-mce-style="border-collapse: collapse; width: 100%; float: left;" data-mce-selected="1"><tbody><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">Effective Date</td><th style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">Prime Rate</th><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">Change</td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">Upcoming: March 12th</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;"> </td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;"> </td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">Jan 29th, 2025</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">5.20%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.25%</td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">Dec 11th, 2024</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">5.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.50%</td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">October 23, 2024</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">5.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.50%</td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">Sept 4, 2024</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.25%</td></tr><tr><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 24, 2024</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">June 5, 2024</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 12, 2023</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">7.20%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">June 8, 2023</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">January 25, 2023</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">December 8, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">6.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">October 27, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">5.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">September 8, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">5.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.75%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 14, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">4.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+1.00%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">June 2, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">April 14, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.20%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">March 3, 2022</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">March 30, 2020</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">March 17, 2020</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">March 5, 2020</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.50%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">October 25, 2018</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 12, 2018</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">January 18, 2018</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.45%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">September 7, 2017</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.20%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 13, 2017</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.95%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 16, 2015</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.70%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.15%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">January 28, 2015</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.85%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">-0.15%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">September 9, 2010</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">3.00%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">July 21, 2010</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.75%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr><tr style="border-color: #000000;" data-mce-style="border-color: #000000;"><td style="width: 40px; border-color: #000000;" data-mce-style="width: 40px; border-color: #000000;">June 2, 2010</td><td style="width: 25%; border-color: #000000;" data-mce-style="width: 25%; border-color: #000000;">2.50%</td><td style="width: 20px; border-color: #000000;" data-mce-style="width: 20px; border-color: #000000;">+0.25%</td></tr></tbody></table> <h3>Pros and Cons of Each Mortgage Type </h3>Benefits of a Fixed Rate Mortgage: - Predictability: Your interest rate and payments remain the same until renewal. - Stability: Ideal for those who prefer budgeting with certainty. - Peace of Mind: No need to worry about rate fluctuations affecting your payments. Benefits of a Variable Rate Mortgage: - Potential Savings: If the Prime Rate continues to go down, you can save on interest costs. - Flexibility: You may be able to lock into a fixed rate later if needed. Switching from Variable to Fixed Rate If you start with a Variable Rate Mortgage but become concerned about rising rates, many lenders allow you to convert to a Fixed Rate Mortgage during your term. However, it’s important to understand:<ul><li>You’ll lock in at current fixed rates at the time of conversion, not the rate you originally qualified for.</li><li>Some lenders may offer their best fixed rate, while others may provide a higher posted rate—so ask in advance.</li></ul>Strategy for Managing a Variable Rate Mortgage If you choose a Variable Rate Mortgage but want to minimize risk, consider setting your monthly payment higher than required. For example, set your payment as if you were on the current five-year fixed rate. This allows you to:<ul><li>Pay off more principal while rates are low.</li><li>Create a buffer in case rates rise in the future.</li><li>Reduce overall interest costs and stay ahead of your amortization schedule.</li></ul>Which Mortgage Type is Right for You? A Fixed Rate Mortgage is great for those who prioritize stability and want predictable payments. A Variable Rate Mortgage can be beneficial if you’re comfortable with some risk and want to take advantage of potential interest rate savings.Ultimately, the right mortgage depends on your financial goals, risk tolerance, and market conditions. If you’re unsure, consulting with a mortgage broker can help you make the best choice for your situation.As always, I am here to answer any mortgage related questions that you may have and help you crunch any numbers that you don’t quite understand - <a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" target="_blank" rel="noopener">book a call here</a>.

Fixed vs Variable Rate Mortgages

Black Office Calculator with ''MORTGAGE'' on Digital Display Among Office Products

On Jan 29th, the Bank of Canada (BoC) implemented a 25-basis-point rate cut to their overnight rate. While this might bring some relief for borrowers, it may not be a long-term trend. In fact, there’s a good chance rates won’t stay low for more than 9 to 18 months—especially with factors like U.S. tariffs and inflation potentially reversing the rate-cut momentum.So, what does this mean for homeowners, buyers, and anyone needing a mortgage? Let’s break it down.<h3>Rate Cuts: A Short-Term Boost or Long-Term Relief?</h3>When interest rates drop, borrowing gets cheaper, and we often see: ✔ Lower mortgage payments for those renewing or locking in a new rate. ✔ Increased homebuyer demand, as affordability improves. ✔ A more active real estate market, even in winter.But it’s important to be realistic—this might be temporary. If inflation picks up or new economic challenges arise (like potential U.S. tariffs on Canadian goods), rates could climb back up sooner than expected. That’s why being strategic with your mortgage decision is crucial.<h3>&nbsp; Key Market Updates You Should Know</h3>📉 Canada’s 5-year bond yield has dropped slightly over the last few days. Bond yields influence fixed mortgage rates, so if this trend continues, we could see some relief in fixed rates soon.📊 What are the experts predicting?&nbsp;<ul><li>The median forecast for 2025 suggests the BoC’s overnight rate could drop to 2.50% later this year. (Currently it sits at 3%).</li><li>Meanwhile, in the U.S., the Federal Reserve held rates steady for now. Since Canada often follows U.S. economic trends, this is something to watch.&nbsp;</li></ul><h3>How to Make Smart Mortgage Decisions in an Uncertain Market</h3>With so much uncertainty ahead, here are 9 practical strategies to help you navigate your mortgage decision:1. Considering a Variable Rate? If you’re comfortable with some risk and plan to keep your mortgage for 5+ years, a variable rate could still be a good option due to its flexibility and potential savings over time.2. Need Budget Certainty? If you prefer stable payments, a fixed-payment variable rate is a better choice than an adjustable-rate mortgage (ARM). It keeps payments steady even if rates fluctuate.3. Locking in a Fixed Rate? If your closing date is a few weeks away, securing a 5-year fixed rate now can protect you in case rates rise again. If rates drop before closing, you may still have time to switch to a shorter term.4. Renewing Soon? If you’re up for renewal in the next few months, check if your lender allows an early renewal to lock in today’s lower rates before they potentially go up again.5. Variable vs. 3-Year Fixed? Right now, variable rates and 3-year fixed rates are similar in cost. If you’re leaning towards fixed, choose a lender with flexible renewal options to avoid costly penalties.6. Need Extra Financial Cushion? Consider setting up a home equity line of credit (HELOC) now while you still qualify. This gives you a backup plan if financial conditions tighten later.7. Want Lower Payments? Extending your amortization period can help keep monthly payments lower, with the option to pay down your mortgage faster later.8. Trying to Time the Market? If you plan to switch to a fixed rate later, choose a lender with fair conversion terms to avoid unexpected penalties.9. The Best of Both Worlds? A hybrid mortgage (half fixed, half variable) provides rate security while allowing you to benefit if rates fall. It’s an option worth considering in today’s uncertain environment.<h3>&nbsp;What’s Next?</h3>The latest rate cut may create a short-term window of opportunity for homebuyers and those renewing mortgages. However, the bigger picture remains uncertain, and rates may climb again within the next 9 to 18 months if inflation pressures build up.If you’re unsure what strategy is best for you, let’s chat! I can help you make the right choice based on your financial goals and risk tolerance.<a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" data-mce-selected="inline-boundary">Book a Call here﻿</a>Let’s make sure you’re set up for success in 2025—no matter what the market throws our way!

What the Bank of Canada Rate Cut Means for You & How to Navigate Mortgage Uncertainty

Friendly insurance manager or mortgage broker meeting with clients at her office

The big question on everyone’s mind is: Will mortgage rates go up or down? It’s a tug-of-war between forces pushing rates lower and those keeping them elevated. Here’s a breakdown of the key factors shaping the future of rates.<h3>Forces Supporting Lower Mortgage Rates </h3><ol><li>Bank of Canada (BoC) Easing - The BoC’s efforts to lower rates can drive bond yields down, which often leads to reduced mortgage rates. However, markets may already be anticipating further accommodation, muting its impact.</li><li>Potential U.S. Tariffs If the U.S. imposes significant tariffs on Canada, it could slow GDP growth substantially, pressuring rates to fall.</li><li>Population Declines Fewer people participating in the economy means less spending and investment, which can lead to slower growth and lower rates.</li><li>Weak Labour Market Trends Declining hours worked and softening wage growth are signs of economic slack, which tend to lower borrowing costs.</li></ol><h3>Forces Pushing Against Lower Mortgage Rates </h3><ol><li>Bank of Canada Easing (Again) - While initial rate cuts reduce yields, too much stimulus can eventually spark growth, prompting markets to expect rate hikes.</li><li>Potential U.S. Tariffs (Again) Tariffs could raise the cost of goods, inflating prices and fueling inflation expectations, which may increase rates.</li><li>Economic Resilience Canada’s economy is still showing signs of strength, with rising full-time employment and a rebound in housing activity. These factors can keep rates stable or higher.</li><li>Core Inflation Trends Inflation may be muted in the short term, but core inflation is creeping upward, creating resistance to lower rates.</li><li>Government Stimulus Spending Consumer spending remains robust, buoyed by potential federal stimulus programs. This spending props up inflation, making rate cuts less likely.</li><li>Strong Wage Growth Wage growth remains strong, ranging from 3.9% to 5.5% depending on the data source. This supports inflation and limits rate cuts.</li><li>Currency Depreciation A weaker Canadian dollar boosts export competitiveness but increases import costs, which can fuel inflationary pressures.</li><li>Rising Term Premiums on Bonds Bond investors’ concerns about government spending have driven term premiums higher, adding upward pressure on rates.</li></ol><h3>Why It’s Hard to Predict Rates</h3>While market pricing reflects the collective wisdom of traders, even “Mr. Market” struggles to look beyond a year with clarity. Research shows that traders’ projections beyond one or two quarters often lack accuracy.For borrowers who are risk-averse, this uncertainty underscores the importance of hedging their bets. Inflation, growth, and policy surprises could shift rate expectations dramatically in either direction.<h3>What Should You Do? </h3>In a market this unpredictable, the smartest move is to evaluate your options now. Whether you're buying, refinancing, or renewing, preparing for different scenarios can help you lock in savings or avoid unexpected costs.Want to discuss your strategy? <a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" target="_blank" rel="noopener">Reach out today</a>—we’ll help you build a plan that’s tailored to your goals.

Are Mortgage Rates Headed Higher or Lower? Breaking Down the Key Forces

<h3>Big news for Canadian homeowners!</h3>Starting November 21, 2024, the stress test requirement on straight switches for uninsured mortgages will be lifted. This means banks can now accept mortgage switches without subjecting homeowners to additional qualification hurdles. While some lenders may take time to adapt due to internal updates, this policy change offers an exciting opportunity for homeowners to secure better mortgage options with greater ease.<h3>What Does This Mean for You?</h3>If your mortgage is set to renew within the next two years, you’re part of a significant wave of Canadians preparing for renewals. Here’s how you can make the most of this changing landscape:1. Start Planning Early Begin strategizing 8–12 months before your mortgage matures. Working with a mortgage professional like me during this period allows us to: <ul><li>Explore all available options.</li><li>Lock in the best rates and terms ahead of time.</li></ul>2. Leverage Broker Expertise A broker provides unmatched value when navigating renewals:<ul><li>More Options: Unlike sticking with your current lender, I can shop around with multiple lenders to find the best product for your needs.</li><li>No Stress Test Hassle: With the policy change, switching lenders without a stress test is now easier for eligible homeowners.</li><li>Tailored Advice: Whether you're renewing, refinancing to consolidate debt, or considering a line of credit, we can craft a personalized strategy to meet your financial goals.</li></ul><h3>Why Work With Me? </h3>Customized &amp; Accessible Service I understand that life is busy. That’s why I offer:<ul><li>Flexible, after-hours consultations. </li><li>Virtual meetings to fit your schedule. </li><li>Transparent Guidance </li><li>You deserve to know all your options.</li></ul>I will<ul><li>Compare offers from your current lender and competitors.</li><li>Help calculate the true cost of each offer, factoring in hidden fees or restrictions.</li></ul><h3>Why Choose a Mortgage Broker? </h3>Renewals, refinances, and purchases require expert navigation. As a broker, I provide:<ul><li>Comprehensive Market Knowledge: Stay ahead of trends like the stress test changes.</li><li>Objective Insights: I work for you—not the banks—to ensure your mortgage fits your needs.</li><li>Ongoing Support: Whether you want to explore your options or validate your current deal, I’m here to help.</li></ul>Let’s Get Started Mortgage renewal or refinance approaching? Let’s explore your options together:👉 <a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" target="_blank" rel="noopener" data-mce-selected="inline-boundary">Book a Call With Me</a><figure id="figure-5mjq5hb09mm3rj9814"><img id="5mjq5hb09mm3rj9814" src="https://cdn.durable.co/blocks/23BqPvRpLDQUkJAVOr5PA5P31KtTgwA681vOzDsWJqheA9MwVH13Y36PDRpSpjQn.png" alt="" title="" class="object-cover bg-gray-100 rounded-sm md:rounded-md lg:rounded-lg" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/23BqPvRpLDQUkJAVOr5PA5P31KtTgwA681vOzDsWJqheA9MwVH13Y36PDRpSpjQn.png" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>P.S. Know someone with mortgage questions? Introduce us via email! If they book a call with me, you’ll be entered into my monthly draw to win $2,500!Looking forward to helping you navigate your renewal, refinance, or next purchase—and giving you the confidence to make the best financial decision for your future.

Major Mortgage Update: Stress Test Changes and Renewal Strategies

Real estate agents and business people discuss signing a home purchase agreement and home insurance.

Canada’s annual inflation rate has returned to the Bank of Canada’s (BoC) target of 2% as of October 2024, raising the likelihood of interest rate cuts in the near future. Market speculation is mounting for a rate reduction as early as December, as the central bank looks to support economic growth while maintaining price stability.&nbsp; <h3>Inflation Insights</h3>In October 2024, key inflation metrics reflected a notable rebound: <ul><li>Inflation Rate (Year-over-Year): Increased to 2%, up from 1.6%, aligning with the BoC’s target and slightly surpassing market expectations of 1.9%.</li><li>Core Inflation (Year-over-Year): Edged up to 1.7% from 1.6%.</li><li>Inflation Rate (Month-over-Month): Rose by 0.4%, recovering sharply from a -0.4% decline in September. </li></ul>Additionally, the trimmed and median Consumer Price Index (CPI) metrics climbed to 2.6% and 2.5%, respectively, indicating that inflationary pressures are broad-based across the economy.&nbsp; <h3>Falling Bond Yields Amid Global Tensions</h3>While inflation data points to economic stability, geopolitical tensions are causing bond yields to decline. This morning, both U.S. and Canadian bond yields dropped as investors shifted toward safer assets:<ul><li>U.S. 10-Year Treasury Yield (US10YR): Fell to 4.349% (-0.065).</li><li>Canada 5-Year Bond Yield (CA5YR): Declined to 3.076% (-0.03). </li></ul>These movements reflect heightened market concerns stemming from escalating U.S.-Russia tensions.<h3>&nbsp;Geopolitical Volatility: The Bigger Picture</h3>Global markets are reacting to a significant geopolitical flashpoint:The U.S. has authorized Ukraine to use long-range missiles within Russian territory. In response, Russia has lowered its nuclear deployment threshold, increasing the risk of broader conflict. This has driven investors toward safe-haven assets like U.S. Treasury bonds, pushing their prices higher and yields lower. Canadian bond markets often mirror U.S. trends, resulting in similar declines in the CA5YR yield.<h3>&nbsp;What Does This Mean for Borrowers?</h3>For Canadian borrowers, these developments may bring potential relief:<ul><li>Lower Interest Rates: With inflation at the BoC’s 2% target, the central bank has more flexibility to cut rates, reducing borrowing costs.</li><li>Falling Fixed Mortgage Rates: Declines in bond yields often translate to lower fixed mortgage rates, benefiting new buyers and those refinancing.</li></ul>However, ongoing geopolitical uncertainty could continue to impact financial markets, so borrowers should stay vigilant.<h3>&nbsp;Takeaway</h3>Canada’s return to the 2% inflation target signals potential rate cuts on the horizon, a positive shift for borrowers. However, global instability is adding a layer of unpredictability to bond markets and borrowing costs. Staying informed about these trends will help you navigate your financial decisions more confidently.If you’re wondering how these changes might affect your mortgage options, feel free to book a call - visit <a data-mce-href="http://www.MortgageCall.ca" href="http://www.MortgageCall.ca" data-mce-selected="inline-boundary">www.MortgageCall.ca﻿</a> Let’s discuss how you can make the most of the current market environment!&nbsp; Sources:<a data-mce-href="https://tradingeconomics.com/canada/calendar" href="https://tradingeconomics.com/canada/calendar">Trading Economics - Canada Inflation Data</a> <a data-mce-href="https://www.bnnbloomberg.ca/business/economics/2024/11/19/traders-trim-bets-on-big-canada-rate-cut-after-inflation-uptick/" href="https://www.bnnbloomberg.ca/business/economics/2024/11/19/traders-trim-bets-on-big-canada-rate-cut-after-inflation-uptick/">BNN Bloomberg - Inflation Back at Target</a> <a data-mce-href="https://www.cnbc.com/quotes/US10Y" href="https://www.cnbc.com/quotes/US10Y">CNBC - Bond Yields</a>

Canada's Inflation Hits 2%: What It Means for Borrowers

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Mortgage rates in Canada are influenced by many factors, but one of the most significant is the yield on Government of Canada bonds. Here, we’ll break down what bond yields are and explain their impact on fixed-rate mortgages in particular.But before we go there, let's clarify something:Fixed-rate mortgage rates in Canada are priced off of Government of Canada 5-year bond yields that are, in turn, influenced by the U.S. Treasuries. Variable-rate mortgages are affected by the Bank of Canada's monetary policy, namely interest rate hikes and cuts that, in turn, impacts commercial banks' Prime lending rate.<h3>What Are Bond Yields?</h3>Bond yields can be thought of as interest rates on loans from the government. When the Government of Canada needs to raise money, it sells bonds to investors, offering them a return on their investment. Bond yields indicate the amount of interest investors earn from these bonds, and they fluctuate according to market conditions. This fluctuation influences other types of interest rates in Canada, including mortgage rates.<h3>How Bond Yields Affect Fixed-Rate Mortgages</h3>Fixed-rate mortgages offer homeowners a stable interest rate throughout their term, giving budget certainty. When you lock in a fixed-rate mortgage, your rate is directly influenced by current bond yields. As bond yields rise or fall, fixed-rate mortgage rates adjust accordingly. However, once your fixed rate is set, it remains consistent for the term of the mortgage, so fluctuations in bond yields only affect your mortgage rate when you initially lock it in.<h3>Why Do Bond Yields—and Mortgage Rates—Fluctuate?</h3>Bond yields fluctuate based on the financial market’s risk-reward balance. When market conditions become riskier, bond yields rise to attract investors. Higher bond yields, in turn, lead to higher borrowing costs for the government, which can drive up fixed mortgage rates.&nbsp;Government bonds have a near-zero risk of default since they are guaranteed to be repaid. Mortgages, on the other hand, carry more risk due to the possibility of default or early repayment, which may disrupt the investment’s return. This additional risk results in mortgage rates being set at a premium over bond yields.<h3>How Much Higher Are Mortgage Rates Priced?</h3>In normal market conditions, Canadian mortgage rates are typically priced about 120 basis points (or 1.2%) above the rate for government bonds. This difference, known as the "spread," fluctuates based on market conditions, investor interest, and the availability of other investment options. Factors like corporate bonds and stock markets—both domestic and international—also compete for investor attention, affecting this spread.<h3>Understanding the Bond Price-Yield Relationship and Mortgage Rates</h3>The relationship between bond prices and bond yields is inverse: when bond prices go up, yields go down, and vice versa. Fixed mortgage rates tend to move in tandem with bond yields. So, when bond yields increase, fixed mortgage rates rise; when yields decrease, fixed rates generally drop as well. This close link between bond yields and fixed mortgage rates is a key reason why it’s valuable to track bond market trends when considering a mortgage.By understanding the influence of bond yields on mortgage rates, you can make more informed decisions about the best time to secure a mortgage, helping to potentially reduce borrowing costs over the life of their loan.As always, I am here to answer any mortgage related questions that you may have and help you crunch any numbers that you don’t quite understand -<a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" target="_blank" rel="noopener"> book a call here.</a>

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Canada's Inflation Hits 2%: What It Means for Borrowers

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