Fixed-rate mortgages have gone up, nevertheless doesn’t matter

Fixed-rate mortgage rates have always been rising, but don’t be hoodwinked into believing that this halcyon low interest  rate nature is ending, because it isn’t.

“Firstly, it doesn’t impacts anybody with an existing fixed-rate mortgage; it’s only for outstanding mortgages—and not variable-rate mortgages—but it’s only gone up 25 % point, which equals $12 for every $100, 000 of all mortgage money, ” Dustan Woodhouse, president of Property loan Architects, told CREW . “This is also well below the stress test threshold, so there’s no change to the mortgage money Canadians qualify for. It only affects new homebuyers about to take five-year fixed mortgages and it only affects them to the tune of $12 extra per $100,000 a month.”

The bond yield has risen, but marginally so, and to negligible consequence, added Woodhouse. However, while higher interest rates shouldn’t worry homebuyers, the slight increase for fixed-term mortgages could compel more people to take the plunge in search of their dream home and, through a function of higher demand, drive prices up that way.

“What happens when the price of something that’s already scarce goes up? People hurry and buy more—they buy faster and sooner,” said Woodhouse. “A little bit of a rate hike will do the opposite of what some expect: it will push the market harder and another quarter-point rate hike will put more heat under the market because people worry about rates rising and that they will, therefore, miss out. A quarter-point or two, or three, rate hike will only make the market crazier and not slow it down at all.”

Consumer behaviour isn’t to be underestimated, though. As Woodhouse alluded to, news of a fixed rate increase might inspire a craze of sorts and consumers, driven by fear of being priced out of the market, could become even more active in Canada’s already white-hot real estate market. In tandem with sales vastly outpacing new listings, prices will only increase faster.

But, Daniel Johanis, principal broker of Pekoe Mortgages, recommends taking a deep breath, because while the fixed-rate upsurge could encourage more people to enter the market, their presence will be as marginal as the hike itself, and, additionally, variable-rate residence are still preferred.

“The amount that fixed quotations have gone up is fairly unimportant, especially in dollars-a-month terms, ” he said. “I’ve started fielding calls from others afraid of not locking to be able to now with preapproval, a rate have a, or even buying now simply because there won’t be enough inventory omitted there and that will eventually the cost them more when they does find a place.

“Look while in the other side of the piece: variable has historically outperformed fixed and you have a lower penalty to go along with more flexibility, particularly since life usually starts and people who break mortgages probably don’t expect to. But if you have to, it’s good to know the won’t cost you as much. ” Johanis also stressed should know about only fixed rates have hit up and that variable prices of property are static.

“The beautiful thing is fixed may have in recent times, but variable is still prime-minus-100 basis points, so to associated with comparison, it used to be closer in between the two and now the variance is widening, ” told me Johanis. “I remind panicked clients that variable is the place it was last month. Focus on buying your property and don’t worry about their too much”

for what the market industry holds in store for the remainder of 2021, Woodhouse is unequivocal that hardly anything out of remains field is to be expected.

“I think the whole year will stay very similar to 2020, ” your guy said, “in that freakish volumes will continue and we may see a little more movement by the fixed-rate side, but not amply to slow down the amount of personal loan money people qualify for, it won’t slow the market record from that perspective. ”