But Why Are Some Rates Going Up While Others Might Go Down?
When it comes to mortgages, everyone loves to talk about interest rates. And for good reason—rates directly affect how much you pay over the life of your loan.
Lately, there’s been chatter and speculation that rates may be trending downward soon.
But if that’s the case, why are some fixed rates edging higher? Let’s break it down!
1. Rate Predictions vs. Market Realities
Yes, economists are speculating that interest rates might move down in the near future, but that’s based on expectations for the Bank of Canada’s overnight rate.
This rate influences variable-rate mortgages and lines of credit more directly than fixed rates.
Fixed rates, on the other hand, are tied to the bond market. Specifically, they follow the yield on Government of Canada bonds.
If bond yields rise (even slightly), fixed mortgage rates often increase too.
Why are bond yields rising now?
- Economic data surprises: Positive reports about employment or inflation can make investors less cautious, causing bond yields to rise.
- Global uncertainty: Investors may demand higher yields as a buffer against unknown risks.
2. Timing the Market Is Tricky
While it’s tempting to hold out for a lower rate, timing the mortgage market is as tricky as timing the stock market.
Fixed rates could drop—but they could also climb higher depending on how the economic winds shift. Even small increases affect your bottom line.
What’s happening now?
- Short-term fluctuations: Banks and lenders adjust their rates based on today’s bond market, not tomorrow’s predictions.
- Risk premiums: Some lenders raise rates to manage risk, especially if they expect a high volume of refinancing or market instability.
3. What Should You Do?
Whether rates are moving up or down, the most important thing is to find a mortgage strategy that fits your goals and budget.
Here’s what we recommend:
- Lock in a rate: If you’re shopping for a home, consider locking in today’s rates for 120 days. It protects you from sudden increases. If rates go down, you get the lower rate.
- Get your renewal approved with your broker sooner than later: We will set your closing date to match up with your renewal date. If rates move up, you are safe. If rates move down, we will monitor and lower the rate.
- Consider variable rates carefully: If rates are speculated to drop, a variable-rate mortgage could save you money—but it comes with risks.
- Talk to your mortgage expert: We’ll help you understand the current market conditions and whether a fixed or variable rate is best for your situation.
Let’s Keep It Simple
At the end of the day, rates matter, but they’re just one piece of the puzzle.
Our job is to help you navigate the mortgage process, whether rates are climbing, falling, or staying steady.
Have questions?
We’re here to simplify mortgages and help you make the smartest financial decision possible.
Are you ready to take the next step?
Reach out today for personalized advice and strategies!
