How has COVID-19 Affected Mortgage Rates So Far, and What’s to Come?
The current pandemic has deeply impacted nearly every industry, ours included. With rampant unemployment and people unsure how best to protect themselves and their families, the amount of houses on the market has decreased significantly compared to this time last year. Because of this, mortgage rates have taken a downward drop to adjust to the change. In fact, we are seeing the lowest fixed and variable rates in years.
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Currently, the Bank of Canada’s target for the overnight rate is 0.25%. This is about as low as prime rates will ever be. This means that variable rates are significantly lower than fixed rates, making them less riskier because there is nowhere to go but up from here. That being said, fixed rates are also at an all-time low. The good news for new homebuyers is that the prime rates aren’t likely to jump up right away, even with the economy opening up. The real estate market needs to see a substantial recovery before those rates can get back to some semblance of normalcy.
Homeowners with a renewal on the horizon can also benefit from these low rates. Even if your renewal date is four months away, take some time to compare mortgage rates. If you find a great rate before the date, you can ask for a rate hold. Remember that sticking with the same lender means you won’t have to go through the process of requalifying for your mortgage.
Choosing to refinance, during your renewal period or really at any time throughout your term can also be beneficial for some homeowners. Breaking your mortgage comes with a penalty fee, but if your new mortgage rate is substantially lower than your old one, you’ll end up saving even with that penalty. Just be aware that in this current economic climate, it may be more challenging to get approved for a refinance. In many cases, lenders are more stringent when it comes to considering income and employment.
Whether you are purchasing, renewing, or refinancing your home, the lower mortgage rates could help save you money. Consider speaking with a mortgage broker to review your options and help you decide if now is the right time to go forward with your plans. For those in the Calgary area, contact our experts at Source Mortgage today!