The Bank of Canada recently announced that they will continue to maintain their overnight rate (the interest rate that major financial institutions borrow and lend one-day, or “overnight”, funds to themselves), for now. The current rate is 0.75%.
What Does This Mean for You as a Homeowner?
Since the overnight rate influences the prime rate, it effectively means that your mortgage rate will remain at the same historic lows. When any financial data appears to be at an extreme level, there’s usually a rare financial opportunity associated with it.
Here are some ways you could be taking advantage of the all-time low rates:
The variable vs. fixed-rate debate is one that never seems to find any true resolve. Of course, the pros and cons vary for each individual and traditionally, consumers have done better with variable-rate mortgages. But if there were an opportune time to take a fixed-rate mortgage, it would be now. The cost difference is about 0.5% more. For example, you might find a rate of 2.15% on a variable rate mortgage and a rate of 2.69% on a 5 year fixed. By taking a variable rate, you’re only getting a 0.54% benefit for taking that risk. Many things can change in 5 years but not if you lock in a low rate today.
Increase Your Mortgage Payments
Whether it’s increasing your monthly payments, setting up an accelerated payment plan or making lump-sum payments towards your mortgage, any extra funds that can be paid makes a bigger impact, since more of the payment will go toward the principal. The lower the interest rate, the greater your potential to pay it off quicker.
Refinance Your Mortgage
With interest rates this low, you owe it to yourself to at least consider refinancing. Why? If you can refinance your mortgage and get a lower rate, even just half a percent less than you’re currently paying, think of the thousands of dollars you can save over time. You gain the benefit of lower monthly payments and before you know it, those savings really add up. In the long-term, every dollar you save now is one less dollar you have to pay the bank. Interest rates on fixed-rate mortgages are at record lows. It may pay to break your current mortgage to refinance for a better rate.
The low-rate environment of today gives a few compelling reasons to act sooner than later. Take advantage of the all-time low mortgage rates. While the rates have been low for some time, it doesn’t mean they will remain this way forever – logic would dictate that the only place for interest rates to go from here is up.
Mortgage rates today are still low, so visit us at http://www.mortgages.ca for more information on our current rate specials!