The Greenhouse
by Pine

The Bank of Canada raises rates again: Is it time to lock in?

It might be time to consider locking into a fixed-rate.

It might be time to make the switch.

For the sixth time this year, the Bank of Canada (BoC) has raised the country’s interest rate

Compared to last month’s announcement, the country’s interest rate has increased by 50 basis points leaving it now at 3.75%. 

While frustrations around the interest rate are even more palpable, it still doesn’t come as a surprise given how high inflation still is worldwide. With the world still recovering from the global COVID-19 pandemic, along with global supply disruptions impacted by Russia's attack on Ukraine, along with the strength of the US dollar, tighter monetary policies are being put in place to control inflation.

And for those on variable-rate mortgages vs. fixed-rate mortgages, this sixth increase by the BoC is yet another pain point when it comes to their monthly payments. By next month, those on variable or adjustable-rates will start seeing the increase in their mortgages. 

If you’re starting to feel the anxiety surrounding the rising prime rates–and you’d rather find more stability and security in your payments–it might be time to consider locking into a fixed-rate or even switching to a new lender. 

Why you should lock into a fixed-rate mortgage now

You’re anxious about the rising rates 

Whenever you hear the news about a potential rate hike, do you start to feel stressed? If you find yourself constantly watching the markets or figuring out where and how to adjust your monthly budget, it might be time to consider locking in. Unlike a variable rate, a fixed-rate mortgage will offer you stability and security, knowing exactly what you’ll be paying month-to month. 

So, if you’re over the “risk” that a variable mortgage rate gives, it might be time to find your best fixed-rate. 

You want the best, current fixed-rate mortgage available to you 

While those who have already locked into a fixed-rate mortgage won’t be feeling the current interest rate hike, for those looking to switch into a fixed-rate from a variable-rate you might. Given that we’re already in our sixth interest rate hike, future hikes may still be a possibility in the future. 

If and when those do occur, the current rates for fixed mortgages will also go up. By delaying when you plan to lock into a fixed-rate, you may end up with an even higher interest rate than present day offerings. 

You’ll save money in the long run

With how often the BoC is raising interest rates, it may actually end up costing you more in the long run to wait out the day when the rates finally drop. However, it is important to note that if you’re breaking your mortgage term early–usually before the five years are up–you’ll often have to pay a penalty fee

When it comes to variable rate mortgages, you’ll usually be looking at a penalty of three-months worth of interest applied to the remaining principal of your mortgage at your currently set interest rate.

And while it may feel like a bit of a cost now upfront, the long term may help you realize there’s much more savings found in making the switch to a fixed-rate mortgage, especially if it’s for a mortgage with one of the lowest rates. 

So what’s the right decision for you?

Whether you’re ready to lock in or if you’d rather hold out for when the interest rates will drop, it’s really up to you. But if you need help understanding what the process looks like or what might be the best approach, it might be beneficial to speak to one of our Pine mortgage advisors. 

Take 10 minutes or less to fill out our application and we’ll make sure you’re connected to one of our trusted advisors to help you figure out what’s best for you. 

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