For many years, the Bank of Canada has left interest rates at a record low. In the last year we have seen 4 increases, each increasing by .25%. The Bank of Canadas prime rate has now gone from .5% to 1.50% in a year. Experts are saying we can expect more rate increases as Canada’s economy slowly emerges from its previous years of slow growth. These changes apply all over Canada, so I ask the question: How is the average mortgage in Regina going to be affected?
It’s not just a mortgage in Regina that will be affected; the rate increase will also effect house hold costs and Canada’s overall economy.
Here’s an explanation:
1. Qualifying For A Mortgage
Economist’s expect the Bank of Canada will continue to raise the prime rate incrementally over the next year, which will further increase overall costs. This may make it even more difficult for consumers to qualify for a mortgage.
2. Household Costs
Prime rates affect the cost of borrowing on floating-rate loans, including variable-rate mortgages, credit lines and student loans. This means that variable interest rates on consumer loans will go up immediately, which will increase overall household costs.
3. The Economy
We may see a larger impact on the housing market if rates continue to rise as expected. Fewer people will be able to qualify for mortgages and will prevent many potential buyers from being able to buy a home. There are many aspects of Canadian economy that are heavily dependant on a strong housing market.
How Can Consumers Prepare?
At the moment, we expect the prime rate to slowly increase for a while, so it may be a good idea to talk to your mortgage professional and discuss your options. Here are some suggestions:
- Consider locking in your mortgage. As the prime rate increases, variable-rate mortgages may be vulnerable. Based on your own risk tolerance, this is a personal decision for you to make. Consult with a mortgage professional.
- Take advantage of your mortgage pre-payment options to increase your principal. This will increase your flexibility during your mortgage renewal.
- If it is time to renew, don’t accept the first offer your bank sends you. You can renew your mortgage different mortgage specialist’s and now you might have to shop around to see who can offer you the best product.
There hasn’t been a Bank of Canada prime rate increase for 9 nine years, so variable-rate mortgage holders have been very lucky. Those who have a fixed-rate mortgage in Regina are being less affected.
So, should you lock into a fixed-rate or ride it out? It depends on you.
Contact Me
If you have questions about the rate increases or would like to talk about buying a home before more rate increases come into play, please give me a call at 306 552 7047 or fill out my online contact form!
Kelsey Smith Is Regina’s Choice
Choosing the right Realtor® is key to ensure a positive and successful real estate transaction. Kelsey Smith promises to deliver the education and time necessary to buy or sell your Regina home. Call 1-306-552-7047 and rest easy knowing you have made the right choice.