While prices for real estate in many parts of Canada continue to rise, homebuyers are now being offered some of the lowest interest rates on mortgages in over two years. Currently, many borrowers are eligible for five-year fixed rates as low as 2.64 percent. Even higher-risk borrowers can find loans for as low as 2.89 percent, which is the lowest range since the summer of 2017.
Why are rates on mortgages so low at the present time? One of the main contributors is the bond market. While lenders offering variable-rate loans take their cues for interest rates from the Bank of Canada’s benchmark rate, fixed-rate loans are financed according to the rates lenders can get in the bond market. This allows lenders to borrow money at one rate and then loan it out to a consumer at a higher rate to earn a profit. Since yield on a five-year bond from the Government of Canada recently dropped below 1.3 percent, lenders who borrow funds at this rate and then offer mortgages at approximately double are highly incentivized to keep offering loans with this margin in place.
While there are many factors that will impact your interest rate on a new mortgage, now is a great time to get pre-approved if you have plans to look for a house or if your mortgage is up for renewal soon. In fact, you can start shopping mortgage rates up to four months prior to your renewal date or when you hope to close.
Your BRM Lending Team broker can assess your needs and find excellent lending options well ahead of your renewal notice. Know that during this time, your bank will start pressuring you to resign at a slightly discounted rate, too, and while it’s good to consider their offer, it is worthwhile to look at all your options. We work for you, not the lender, so contact us today!