Interest rate party winding down

The interest rate party for borrowers is almost over. Following almost five years of historically low rates, we’ve see a lot of upward movement in the cost of money.

Most people watch the central banks for indications that rates are about to take off. But that’s not where the real action is for fixed-rate mortgage holders. This actually takes place in the rarefied world of the bond market, where institutional traders like banks and pension plans operate. By the time the Bank of Canada gets around to acting, the bond market will have left it in the dust.

In order to save as much money as possible, a proactive approach is recommended when dealing with rising interest rates. Budget for future plans. Many borrowers opt for the maximum mortgage for which they can qualify. The problem with this approach is that life happens. It’s important to plan ahead for future changes such as starting a family, maternity leave, relationship changes, health issues, career changes, and so on.

Secondly, ensure you would still qualify for your mortgage if rates continue to increase. For instance, if the five-year rate reached 5.5%, could you still afford the payment? We can sit down and run the numbers to ensure we build a buffer zone into your mortgage.

Use your prepayment options. This will enable you to increase your payment in relation to the increased rate. For instance, if you have a five-year fixed mortgage at 2.89% and rates increase to 3.49%, increase your monthly (or bi-weekly) payment to the equivalent. That way, you won’t experience ‘rate shock’ when your mortgage is up for renewal. It’s important to remember that any extra payments you can make will go straight towards paying down your principal faster, which means you will be mortgage-free quicker.

It may be worth your while to take advantage of a free mortgage check-up before rates increase any further. This will help you determine if it makes sense, for instance, to renew your mortgage a few months early if this means being able to lock into a new five-year term before rates increase even more.

With rates on the rise, it’s more important than ever to take advantage of mortgage brokering services, since we can shop different lenders and advise which ones not only have the best rates, but also which lenders have the best prepayment options and mortgage offerings to suit your individual needs.

Jean-Guy Turcotte is an accredited mortgage professional with Dominion Lending Centres in Red Deer.

Just Posted

Parker Thompson makes a big splash to start the 2019 Road to Indy race season

Double victories in St. Petersburg indicate 2019 could be Thompson’s best season yet

NDP Leader Rachel Notley stops in Red Deer on campaign trail

Notley promises hospital expansion, cath lab, pipelines and energy industry expansion

Red Deer Mayor Tara Veer discusses thoughts on federal budget

New federal infrastructure funding likely coming to Red Deer

Alberta Election called for April 16th

Upcoming election will be about who is fit to be Premier, says Notley

Five highlights in the 2019 federal budget

Latest budget includes a sprinkling of money for voters across a wide spectrum

Carbon tax, oil and gas investment dominate Day 2 of Alberta campaign

NDP pledges more oil and gas processing, UCP slams provincial and federal governments on carbon tax

Another gun seized by police in Wetaskiwin

Maskwacis RCMP arrest two youths, seize firearm in Wetaskiwin

Sundre RCMP looking for 4 missing bison

A Sundre bison rancher is missing four bison from January and RCMP ask for help from the public

Politicians hitting the road for votes in Alberta election campaign

NDP Leader Rachel Notley and United Conservative Leader Jason Kenney have officially launched campaigns

Calgary woman convicted in son’s strep death seeking full parole

The trial heard that Ryan was dead well before his mother called 911 to say he had stopped breathing

Starbucks to test recyclable cups, redesign stores in B.C., U.S. cities

The company also said it plans to redesign its stores as it adapts to increasing mobile pick-up and delivery orders

In pre-election budget, Liberals boost infrastructure cash to cities, broadband

The budget document says the Liberals have approved more than 33,000 projects, worth about $19.9 billion in federal financing

2019 BUDGET: As deficit grows, feds spend on job retraining, home incentives

Stronger economy last year delivered unexpected revenue bump of an extra $27.8 billion over six years

Most Read