|Whether you already have a mortgage or are looking to get your first mortgage amid COVID-19, there are some things you should know regarding fixed and variable rate mortgages during this time.
If you currently have a mortgage, you may have heard on the news about interest rates rising and you may be unsure of where you stand. It may seem confusing, but when it comes to mortgage rates and interest we are seeing things moving in both directions – rates are going up and going down simultaneously. Depending on the mortgage you currently have (fixed or variable) you may be experiencing different effects with regard to COVID-19 and may be unsure where you stand. Here are some things to know:
Variable rate mortgages, which represent 1 in 4 mortgages in Canada, are driven by the Bank of Canada’s overnight lending rate. Having a low variable rate may lead you to have some concerns surrounding the increasing mortgage rates in the country and where that leaves you.
The Bank of Canada has already made several cuts to the bps rate for a full 1% drop. It is important to understand that these cuts to the overnight lending rate actually get passed down to variable mortgage rate holders – unlike for fixed rate mortgages.
If you currently have a variable rate mortgage you most likely already have a discount from prime. As a result, you may have already seen your rates decrease and you may now be sitting around 1.85% to 2.2% variable interest currently. You may be concerned about these rates rising again but the good news is that it is unlikely that you will see significant rate volatility or increases in interest rates on a variable mortgage.
A mortgage professional can help assess your particular financial situation and mortgage, but most variable-rate mortgage holders will benefit the most by not doing anything with their mortgages at this time as the rates are expected to remain low and possibly even decrease.