Skip to main content

Houses are seen in the west end of Toronto on April 21, 2017.

Cole Burston/The Globe and Mail

Canadians are starting to take note that the key number determining how much they pay for a mortgage is very likely going to soon go up.

"My e-mail is exploding right now," says Ryan McKinley, senior mortgage development manager at Vancity Credit Union.

McKinley and other mortgage specialists are increasingly hearing from people in the property market now that the Bank of Canada has strongly hinted it could hike the key interest rate as early as July 12, which would be the first increase in nearly seven years.

Story continues below advertisement

For those looking to buy in the near-term, McKinley says now is the time to lock in a mortgage rate, which financial institutions generally do for between 90 and 120 days.

But for homeowners with a variable rate mortgage, the question is whether to jump into a fixed rate to protect against rate hikes, or continue to ride out the risk and currently lower rates that variable brings.

"It's up to everyone's risk tolerance," says McKinley. "What I always tell people is if you are concerned, if you're going to stay up at night, worried about your variable rate mortgage, then it's not worth taking it."

Online mortgage sites list the lowest five-year variable rates at around 1.7 per cent, or about 2.3 per cent for a five-year fixed. However, many mortgage providers are already raising rates, says Dan Eisner of True North Mortgage.

Eisner says five-year bond yields, which determine five-year mortgage rates, have jumped 0.4 per cent in the last few days to a level not seen since late 2014, before the oil price crash forced the Bank of Canada to drop rates in 2015 to 0.5 per cent.

"This will affect clients who have a variable rate, and they could see their interest rate half a point higher by the end of the year," he says. That means some variable rate homeowners trying to lock into a cheaper rate right now may already be out of luck.

While those with a fixed mortgage won't be immediately affected by rising interest rates, McKinley says those who don't have much time left on a five-year term may want to look into locking in another five years. That may incur penalties, but might still make more sense after doing some number-crunching with your financial institution.

Story continues below advertisement

Because the central bank is only expected to raise the interest rate 25 basis points this round, Frances Hinojosa of Tribe Financial says now is not the time for homeowners to panic. Instead, they should focus on paying down their debt with whatever additional payments they can afford in order to reduce the effects of rising rates.

"Any time's a good time to pay down your mortgage – and even little bits," said Hinojosa.

"It's the little grains of sand that you put toward the mighty mountain that's going to make the difference at the end of the day."

Report an error
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter