Looks like fewer people are buying into the idea that mortgage rates are going to increase in 2013. This according to a studying by CIBC released in mid-March. The study showed that almost half (46 percent) of Canadian homebuyers believe that the near-record low mortgage rates of today are going to stick around for at least another 12 months. That’s almost twice as many people who said the same thing back in 2011 (24 percent).
These findings raise some interesting questions, like whether Canadian home hunters are blindly optimistic or if the expectations of low rates is now relevant to the mortgage selection process?
A Sticky Situation
The Bank of Canada has flip-flopped on the idea of raising mortgage rates, ultimately choosing to keep things steady for the time being. But there’s no promising how long rates will stay low. Experts agree with most Canadians in that rates likely won’t go up until next year, but shaky foreign markets and high consumer debt could always cause things to shift.
Should You Select Your Mortgage Based on a Low Rate?
Yes and no. While rate should factor into your decision, it shouldn’t be the only think you look at when trying to decide on the mortgage rate that’s right for you. There are a number of reasons for this. First, rates are known to fluctuate – a lot. As such, it’s more important that you select a mortgage rate that fits your financial circumstance and future life plans.
Other factors to consider when working with your mortgage broker include:
- Your ability to handle rate increases. This is especially important if you opt for a variable rate or a short mortgage term. Rates will eventually go up, now’s the time to ensure that you can handle the additional cost.
- How long you plan to hold your mortgage. This includes both the mortgage term and whether or not you hope to double up on payments to clear up the debt quicker.
- Job stability. If there’s a chance you might be unemployed in a year, now is not the time to sign on for a risky rate that you can barely cover.
Other Stats and Figures from the CIBC Survey
- 45 percent of Canadians would currently opt for a fixed rate (this is down from 50 percent in 2012)
- 26 percent would opt for a variable rate (down from 32 percent in 2012)