Fixed mortgage rate forecasts over the past few years have been fairly consistent in forecasting continued low mortgage rates in the near term with some upward pressure expected in medium term. A historical look at the last 12 months however reveals a different reality. Mortgage rates and the bonds that drive them have actually fallen almost in tandem by a half a percentage point. Although that forecast remains unchanged today, the starting point is at the low end of the spectrum.
Government of Canada Benchmark Bond Yields – 5 Year
GRAPH PERIOD: 12 August 2013 – 12 August 2014
While economies continue to struggle globally you can expect fixed mortgage rates to remain low for the foreseeable future. While medium term pressures could drive fixed mortgage rates up by as much as 0.75% over the next 6 to 12 months, the resulting payment increases are not earth shattering. For example a $300,000 mortgage amortized over 25 years would experience a monthly payment increase of $117.80 or $54.37 bi-weekly
For many borrowers, the best bet is to maintain a variable mortgage rate or to ride out their existing term until maturity. For those that are most impacted by increases to their monthly payment, the best bet is to lock in now for a new 5 year fixed mortgage rate term and take any risk out of the equation.