Whether refinancing an existing mortgage is a timely option depends to a large extent not only on where interest rates are headed over the term of a refinanced mortgage – and where interest rates are headed is a very muddled question just now – but also on a homeowner’s personal circumstances.
The Bank of Canada is still the only Group of Seven central bank to raise interest rates so far this year, an indication that Canada’s central bankers are “optimistic about the domestic [economic] outlook and seemingly unfazed by slower-than-expected growth in the second quarter,” according to the Globe and Mail.
Bank of Canada Governor, Mark Carney noted that Canadian borrowing conditions remained “exceptionally stimulative,” which perhaps signals a further rate hike when the BoC meets again on October 19 to review its key lending rate. On the other hand, as the remainder of G7 central bankers are decidedly more concerned about stagnating economic growth, perhaps Canada’s central bankers will pause in a rate hiking regimen that has seen the Bank of Canada’s overnight rate move from 0.25% to 1.0% over the course of the year.
The Globe and Mail reports that Mr. Carney has given, “no clear hint as to what he might do next,” either on October 19, or thereafter. As a result, the Bank of Canada’s latest rate hike has “left analysts divided or scratching their heads: Some are now more convinced boost the overnight rate again next month, while others believe more strongly that he will stand pat.”
The uncertainty as to whether and when further rate hikes are likely to occur may leave homeowners considering refinancing their mortgage at an impasse. Perhaps the best advice is that homeowners wavering on refinancing should consult a knowledgeable mortgage broker to review their personal circumstances. While interest rates are still low, personal circumstances – such as the size of any penalty for refinancing early, a reduction in mortgage payments, or a need for interest rate certainty – will likely be the decisive factor as to whether now is the opportune time to refinance.
