Small hikes in
Canadian mortgage interest rates have been witnessed in the past few weeks. As
recent as mid November, 5-year closed mortgages could be taken out for as low
as 3.39%, while the rate you can now get stands at 3.79%. The posted 5-year
mortgage interest rate is now 5.44% (up from 5.29%) and borrowers’ repayment
ability based on posted interest rate will determine whether or not they
qualify for the mortgage, says a Financial
Post report.
However, most
mortgage experts agree that the rate increases should not lead to a significant
impact on buying activity in the market, as they translate to very small
increase in monthly payments. Borrowers of course still have to take mortgage
insurance if they fail to make a down payment that is less than 20% of the home’s
market value.
Borderline
borrowers who want a variable rate mortgage will now have to qualify on the
basis of the 5.44% rate or an interest rate of 3.79% if they agree to a lock-in.
This gap between 5-year mortgages and variable rates may not widen, says CIBC
World Markets senior economist Benjamin Tal. He also expects that Bank of
Canada will not increase rates until mid 2011. Bank of Montreal’s director of
mortgages John Turner says that the minor hike in posted rate will not deter
borrowers from applying for mortgages. He adds that regardless of the hike, if
borrowers’ finances are tight, then they must think twice before investing in a
home.
According to
some experienced mortgage
brokers, the minor rate hikes were prompted by international events and the
rate could see a downward correction soon.
