A look at the lowest available mortgage rates on fixed and variable terms and HELOCs this weekGene J. Puskar/The Associated Press
The uptrend in rates continues
Forgive the apparent repetitiveness in this column lately, but once again, the report is that fixed rates climbed this week.
Fortunately, most of the country’s leading fixed rates only jumped by five basis points this time. (One basis point is one-one hundredth of a percentage point.)
McLister: The next 60 days will be crucial for central banks and variable-rate mortgage borrowers
One flagrant exception was the one-year fixed. The leading lenders in that department boosted pricing by a whopping 20 to 25 basis points.
Short terms have been en vogue given market expectations of lower rates next year. In fact, one-third (32.8 per cent) of Canadians took a one- or two-year fixed in the latest April data from Statistics Canada.
Many of those folks are now worrying about their renewal rate next year, but timing is never perfect. All one can do is trust that short and variable rates outperform long-term, that rates are cyclical and that monetary policy works. Barring some black swan event, team Macklem at the BoC will bring inflation — and rates — back down to earth.
Looking at other terms, the three-year fixed is even more popular than a one- or two-year. Many deem it a workable middle-of-the-road option, and while a three-year doesn’t project as well on paper (based on the market’s ever-changing rate outlook), it’s a heck of a lot better than a five-year fixed. Fixed five-year terms trap you as rates fall, limiting refinance options and often forcing homeowners to pay egregious prepayment charges to exit the mortgage early.
As for variable rates, they’ve become the outcast of the bunch. Only one in eight borrowers are biting on them. Once the market starts pricing in near-term rate cuts, however, variable rates should once again steal the show.
Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.
Robert McLister