Well the inevitable has finally arrived.
Canadians’ favourite mortgage interest rate – the five-year fixed – has shot up to the 3.79-3.99% range, effectively ending the extremely low-interest rate cycle, but don’t kid yourself, these are still great rates compared to what’s to come.
The rate increases won’t stop here either, the long-term range will be to prepare yourselves for the eventuality that we will be in the 5-6% range in the next 12-24-36 months, almost doubling the lows that we saw this past spring.
The bond market, which predicates interest rate hikes for the fixed market, has gone from a low in spring of 1.14% to near doubling to 2.18% a couple of weeks ago to settling in the 1.88% level as of this writing.
Sure it settled down, but it’s been like a springboard in that it’s been bouncing around steadily for the past four months, and I can’t see any changes to that happening any time soon.
Up .20 basis points one day, down 0.10 the next and then up another 0.15 the next. It’s a very finicky market, mostly based on the economic strength of the U.S. and G20 countries’ economic activity.
With the U.S. and many EU economies finally finding their footing in the global economic rebound, we are sure to see some further gains. As their employment growth also catches up, so will higher costs to the home buying consumer.
We’ve been and are still fortunate that interest rates have stayed this low for so long and most Canadian homeowners have benefitted from these times.
Many first-time buyers thought that these interest rates were the norm, but sadly they were educated that this was merely a gift from a recession/economic plunge sprung five years ago thanks to the barons of Wall Street.
Without them the world would never have seen such low interest rates, nor would we have seen such a dramatic global economic downturn and government intervention in the markets.
Well, super low five-year fixed interest rate, you’ve been good to us, and we’ve appreciated you for so long. Now it’s time for you to go to rest as you’ve been really busy the past couple of years, showering us with low mortgage payments and housing costs, now we’ll just have to get used to having just low interest rates for the time being as we’ll soon be bidding him adieu as well.
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group in Red Deer.