The Canadian mortgage environment
Various experts in their respective financial related fields have expressed opinions and given forecasts related to changes in mortgage interest rates. However, the general impression indicates it’s a case of “possible,” “probable” and “maybe.” Therefore, it could be a worthwhile move to conduct some research on your own account and see what you come up with?
The new five-year interest on fixed mortgage rates was reduced from 3.49-percent and is regarded by some as being a partial reaction to declining bond yields. These are generally associated with influencing the direction of long-term mortgage rates by the banks. Some skeptical impressions have included that this could be a marketing ploy.
The funding of mortgages by banks is by way of bond markets. Accordingly, when the yields are high, the banks are forced into paying higher interest on those bonds. Like all other market-related costs, they are in turn recouped from you, the consumer, in this instance, by way of the fixed mortgage rates’ interest. Alternatively, when the yields are low, the banks are able to share those savings by offering lower rates.
Being realistic, it must be said that in recent times, Canadians have become familiar and comfortable with, some may say, extraordinarily low interest-rates for mortgages. This has arguably created an environment in which a mortgage rate cut such as that from BMO has not impacted as it did in the past. The present Canadian generation has not been exposed to high or even increasing mortgage rates. Therefore, it could be seen by them as just being the norm, or of some small significance!
Admittedly, there are various other influencing factors regarding the decision for new home buyers entering the market. Ignoring the interest rate on a mortgage, primarily, it’s the relation to the job market and affordability of the initial costs associated with buying a home; for example, property and land-transfer taxes!
Although the advent of a 2.99-percent interest rate on mortgages may be an influence in making homeownership slightly more affordable in housing markets like Toronto, it is not generally expected to make too much of a difference otherwise!
For any new home buyer, it’s your decision, based on your personal circumstances. Use your own discretion with some market research and seek the advice of a qualified mortgage broker regarding interest rates.