Ratebot.ca: Canadian Mortgage Interest Rates Are Starting To Go Up.

June 10, 2009 - PRLog -- It seems that interest rates have reached their rock bottom and are starting to rebound. We have noticed that some of the lenders are increasing the interest rates offered on 1-5 year fixed closed terms. The lowest interest rate for a 5 year fixed mortgage that we have recorded remains at 3.39 % mark. However it is not offered anymore.

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Historically mortgage interest rates movements have been similar to bond rates. For the past month bond rates have started to climb up and mortgage interest rates are following. Mortgage rates lag behind because it takes longer for banks to change the policy and it is not driven by supply and demand like the bond market is. It is mostly driven by profitability and competition.
Recent downward movement of mortgage rates have helped lots of Canadians to lower their mortgage payments as well as increased housing affordability in general. However lots of Canadians are still waiting and holding of the refinance of their mortgage due to uncertainty in the market. They believed that interest rates are still on a downward slope and are waiting to see the rock bottom level before they sign the new mortgage agreement.
Waiting is risky. Interest rates are subject to change without a notice so unless you got yourself locked in to a rate ahead of time – you will not be able to get the lowest rate anymore. There is still some time left before major banks will increase the rates offered to the public. However the maximum discount available to you from a bank is already most likely increased.
The chance of rates dropping back is quite low and almost everyone will say that today is the time to refinance before rates go back up higher than 4%.
However there is still a positive side of this movement. As fixed interest rates rise the variable rate premium starts to fall. Today we can see that it is possible to get variable mortgage at prime + 0.25 (or 2.5%) and if the Bank of Canada announcement about prime rate is credible we can safely assume that prime rate will remain at 2.25% level for one more year.

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