It was the beginning of last month when bond prices plunged and RBC increased mortgage rates in response. Not too long after Scotiabank and TD followed suit. But while homeowners and home buyers are groaning about these higher mortgage rates, they’re not all bad. And in fact if you look at them from a certain perspective, they may even be seen as a good thing. Why?
Rates are still incredibly low
Yes, the 3.69 per cent is higher than the 2.99 per cent that some of these banks have been offering since the recession. But remember November 2008? Rates on conventional five-year mortgages were sitting at 7 per cent – and many thought those rates were low! No, you won’t be able to get the hot deal on your mortgage that you would have say a year ago. But you can still get a pretty good one.
You have time to plan
Yes, oftentimes a small rate hike such as the 30 basis points we’re looking at on a 10-year-closed mortgage (RBC) is indicative that rates are going to climb even higher. But use these small rate hikes as the clouds that gather in the sky just before a massive storm. Look at them, and make adjustments for the conditions ahead. Is now the time to switch to a fixed rate before rates go even higher? Do you need to refinance to make payments more affordable for you? Small rate hikes are an opportunity to plan for your mortgage, and make sure that you’ll be able to afford it if rates go even higher.
Rising mortgage rates don’t indicate trouble
Yes, they may spell a bit of trouble for your household budget, especially if you’ve strapped yourself so tightly that you now have no wiggle room. But bigger picture. Mortgage rates were only put down so low in the first place because the economy was struggling. In fact, all economies were struggling – a lot. Rates were lowered so that consumers would continue spending and our domestic economy would be kept afloat. Now those are no longer needed and banks can start raising their rates a bit. Higher rates sometimes mean a stronger economy, and stronger economies equal out to more incomes and more jobs.
Not all banks have increased their rates
As we’ve stated, Scotiabank, TD, and RBC are the only banks that have increased their mortgage rates so far. Other lending institutions may be watching and waiting to see what happens for them after this move, to see if they follow suit as well. In the meantime, if you’re still looking for those rock-bottom deals and historical lows, these other institutions might be the ones to check.
