The last time Mark Carney spoke about interest rates, he said that hikes were “less imminent.” And now that he’s leaving us for the Bank of England, it’s likely that he won’t have to speak about them at all; as rates probably won’t go up until midway through next year. Still, even they do go up in the spring, that means now is the time for homeowners to refinance or apply for a second mortgage – and lock in the historical low rate while they can.
Typically submitting the actual refinancing paperwork, hearing back from the lender and closing the new loan can take anywhere from two to four weeks. However, there are many other things that have to happen before you may even be able to apply for a refinance, such as an appraisal of your home which will need to be done in order to determine the true market value of the home. Completing these things, as well as anything else the lender requires of you, may take up to several months and so, if you want to make sure that you can still lock your refinancing rate into today’s historical low, now is the time to start the refinancing process.
Laura Parsons, a mortgage broker in Calgary, says that she thinks now is definitely the best time for homeowners to refinance, because rates won’t stay this low forever, and they’re most likely not going to drop, despite some economists saying otherwise.
“Certainly rates are near historic lows, but rates are bound to climb eventually,” she says. “Locking into a fixed rate can provide added peace of mind in the face of potential interest rate hikes. If you have had a variable rate mortgage but are looking for payment certainty and rate protection, you may want to consider moving to a fixed rate.”
Another benefit that applying for a home refinance in the winter has over spring and summer months is that lenders and brokers are typically slower, as the buying market sees a drastic slowdown in this period. This could mean that paperwork is transferred more quickly, and that the entire process is completed much faster – another reason why now is the right time to refinance.
There are always costs to refinancing and so, the time is not always right for every homeowner. But if you think that changing the terms of your mortgage would be a good option for you within the next few months, speak to a mortgage broker. Doing this well before you even start the process can better prepare you for what’s ahead, which will help the process go more smoothly. And, the interest rates aren’t likely to spike, as Mark Carney’s philosophy would still hold true at the Bank of Canada.
“In this business you’re either hawkish or dovish. Hawkish people are very suspicious of inflation and dovish people are slightly more accommodating. Carney is in the hawkish camp,” says Louis Gagnon, finance professor at Queen’s University School of Business.
“I think the Bank of Canada as an institution, not only the governor, but the body, is hawkish. I’d be very surprised if they were to select someone who has a different philosophy, because that person would not sit well with that group of people.”