Last week I received several calls at our Mortgage Architects office in Hamilton, regarding the latest on mortgage interest rates. At Robert Floris’s office along with other offices in Canada, we saw a slight edge up of our home rates. Clients wanted to know if they should lock in since the mainstream media has been declaring that higher rates are coming.

Indeed mortgage rates have risen. As an example 5 year fixed rates have gone up between 10 and 20 BPS (ex rates went from 2.69% to 2.84%) As well variable rate have come up. A $300,000 mortgage based on a 25 year amortization with the increase of 2.69% to 2.84% will lift your mortgage payment from $1,372.45 to $1395.22. This is still affordable.

When I study the mortgage market, I enjoy reading everyone’s views and then decide with my own thoughts where my best guess will be. Truth be told, nobody really knows where rates are headed. We all take our best prognostications.

As discussed previously low mortgage rates have held up the housing market in terms of elevated prices.
The TD economist Diana Petramala believes interest rates in terms of mortgages will keep going up. Her view is that rising rates will reduce sales by up to 15%. Ms. Petramala is also of the belief that Canadians are vulnerable to rising interest rates as do I. She is correct since our nation is one of the most indebted nations in the world. It is my opinion as I have stated, that our economy appears weak and that lifting rates will hurt not only everyday Canadians but hurt our overall economy.

A commodity such as oil has hurt Alberta. We are only starting to see the repercussions since it takes time to affect the market. The slowdown in prices and sales are just beginning to accelerate lower in cities like Calgary and Fort McMurray.

At the end, here is what I tell my variable rate clients if you have a deep discounted ARM, lift your payments to reflect a 3% or a 3.25% mortgage payment; the extra funds go to principal, as well if rates continue to go up clients will already be used to paying at this lifestyle. Either way you are protecting you families and getting the best value for your dollars and payments.