What do falling interest rates mean for borrowers?
This clearly falls into the 88% of the time where borrowers get significantly ahead by having a variable rate mortgage. With the mess in the US expected to take several years to get sorted out, we are in an unprecedented time where we can safely assume rates will remain low.
Where did this come from?
This specifically came from the US and its debt ceiling. When it was announced the US could be a risk to investors and it rating was downgraded, investors from the stock market moved to safe investments – Canadian Government Bonds. When everyone moves to a safe investment, their return goes down (less risk = less return). This means that fixed interest rates go down.
Although the Prime rate is based on the Bank of Canada and unemployment in both Canada and the US has gone down over a half of a percent, the probability of a rate decrease has gone up significantly for September and again at years end. This comes just weeks after the Bank of Canada almost guaranteed we would see a hike befores year’s end. On a variable rate mortgage or line of credit, you will see continued low rates with no increase to your monthly payments.
Fundamentals never go out of style!!! Don’t wait…..if youhave a mortgage above 3.5%, redo it…..and if you don’t own property, now is the time to buy!!!!
Will real estate follow?
Real estate does not follow the stock market and it is not as volatile. You have a basic need to live somewhere so if the payment is affordable and it fits into your budget, it’s in your best interest to act now. When people stop migrating to Ontario and people are leaving Ontario that’s when you may have some concern…..Ontario is booming and shows no signs of slowing down.
Helping you understand the market.
Steve DeRee – Mortgage Agent, Dominion Lending Centres
Phone: 416-906-8033 Email: SDEREE@DOMINIONLENDING.CA