Nothing like waking up to more expensive debt on a wet Wednesday morning!.. but don’t believe all the hype, it ain’t that bad.
I thought I would put together this brief email after hearing of the latest rate hikes and promptly having a few of my current buyers reach out somewhat panicked. I figured I’d share with you what I’m telling my clients in case you yourselves are getting some cases of the Buyer Blues..
In a few words..
- This is a 0.25% increase, not a 2.5% increase
- Your fixed rate pre-approval has not changed at all
- Your fixed rate mortgage has not changed at all
- This increases only Variable mortgage payments by approximately $13/month for every $100k borrowed, (ie: less than half of your monthly cell phone bill for every $400k you borrow)
- These changes do not happen at random, and your rate cannot double overnight
In a few more words:
Yes, while the bank lending rate just increased, this change is actually quite nominal. In 2016, we had record low rates, and at some point the economy was going to pick up to a level where those would need to rise: welcome to 2018. However, don’t be lured into the media hype or provocative headlines indicating some sort of debt doomsday (Case in point) as the vast majority of your debt loads will remain unchanged, or only see a slight increase in payment. The fact remains that rates are still attractive, and while they have risen, we are right where we were in 2010 – and the world didn’t end then.
Will Rates Rise Again?
Perhaps. Still much uncertainty in the local Canadian economy (think NAFTA negotiations). Also, we constantly hear about mountains of debt loads for Canadians therefore spiking rates will undoubtedly cause consumer default and discourage consumer spending – two of the feds’ biggest worries. We may see a couple more before years end, but plenty of time to prepare for such changes.