Navigating the ups and downs of mortgage rates

Ever get that nagging feeling that something bad is going to happen, and feels like it’s just around the corner and then nothing really drastic happens even when all factors lead to something that is supposed to happen?

Since 2009 fixed interest rates have stayed at or near historic lows and all signs point upwards as rates historically rise faster then they fall.

Sure they’ve hobbled along a bumpy road moving slightly up, then slightly down but nothing really drastic has occurred as positive news comes along quickly but then is curbed by negative economic news, major catastrophes or even new wars.

I’ve been in the mortgage industry for six years now and economists surely have been front and center with regards to their economic forecasts since September 2008.

One recurring theme they ‘always’ say, is never say always, and never say never. Even though it’s redundant, it’s been proven that it’s near impossible to predict interest rates and economic futures.

With interest rates as low as they are, most economists keep saying that they’ve only got one way to go, and that’s up.

Surely this is true for the long term and that’s easy enough to predict based on the past 100 years, but for the short term the national economy keeps getting tripped up by some global event that affects us all.

And this seems to have stalled the huge increases that many have been calling for, except for that one month in 2010 where rates shot up a full point in one month, and then tumbled shortly thereafter.

From the sidelines, what I’ve found quite interesting is watching buyers’ behaviors, whereas we were so used to interest rates in the 5.25-6.25% range for 20 years that the consumer that is currently buying at levels right around the 3% +/- level.

And the excitement with that is waning.

Consumers are now getting quite complacent with where interest rates are at, but who can blame them. The basis for which they’ve become complacent is based on the past four years whereas such excitement was created by the fact that we were near historic interest rate lows and the euphoria created with that felt like you were winning the lottery.

Benjamin Tal, Canada’s most quoted economist, says that interest rates will likely be going up but slower than originally thought and we shouldn’t see the drastic increases that have been brought to light over the past couple of years.

This is very important information to know, because it may slow down the process of the consumer making their home buying decisions. They will no longer have that rushed feeling that if they don’t buy now, rates will shoot up and they’ll miss out on thousands of dollars of savings.

But on the other hand how true is this?

This time last year rates went up a full percentage point in as little as a month! The cost of that on a $300,000 mortgage is $15,000 over a five-year period or $250/month!

Interest rates are going to do what they are going to do; the consumer doesn’t have any control of that.

What the consumer does have control over is preparedness, meaning get educated on the housing market and interest rate market. How does one do that? Hire the correct professionals; on the buying end you are in control, the information is free.

Bottom line, if you’ve teamed up with the right professionals and educated yourself properly, then when you’ve found the right house all else should fall into line quite smoothly even though the interest rate ride may be a little bumpy, but that’s what 120-day rate holds are for!

Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group.

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