The Problem with Low Mortgage Rates

Anyone with a mortgage is happy to hear that mortgage rates are dropping. With today’s ultra low mortgage rates we’re even happy to hear that they’re just staying the same. Low mortgage rates mean low monthly payments and we’re all happy to have a little extra money each month. The problem with low mortgage rates is that they’re the result of an anemic economy with a weak outlook.

An anemic economy means weak wage growth and greater risks of unemployment.  Many of us would be better off with a higher mortgage rate and a secure higher paying job.  Certainly, the unemployed would be better off with a higher mortgage rate if it came with a job.

The growing ranks of retired Canadians are not enjoying this period of prolonged low mortgage rates either.  Low rates wont allow their retirement savings to generate a reasonable income, and the prospect of investing their nest egg in the stock market is unthinkable to most.

Believe it or not the best case scenario is to see mortgage rates rise back to normal levels. This would come in response to accelerating economic growth with strong employment and wage prospects.  Lets enjoy the low mortgage rates while they last but don’t fear an increase. A rate increase may be better for you than you think.

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