Toronto (CP)
Tuesday's rise in variable mortgage rates will have some homeowners looking to lock in their rates, but experts say not to be hasty.
The cost of a variable mortgage has risen for the sixth time since the summer, after the Bank of Canada announced Tuesday it is hiking its benchmark interest rates by a quarter-point.
About 22 per cent of Canadian mortgages are now variable, moving in step with the bank's prime lending rate, says CIBC World Markets senior economist Benjamin Tal.
Andrew Moor, CEO of mortgage brokerage firm Invis, says more customers have been opting for fixed-rate mortgages over the last few months as interest rates have risen.
But, he adds, the carrying costs on a variable mortgage are still less than those on a fixed-rate mortgage.
After Tuesday's rate hikes, a competitive variable mortgage rate will be about 4.85 per cent, up from 3.45 per cent at the beginning of September, according to Invis.
As a result, the payments on a $150,000 mortgage will have risen from about
$745 a month to about $860. A five-year fixed mortgage could be obtained at
4.5 per cent in September. That would cost $830 a month on a $150,000, 25-year mortgage.
Today the rate is more like 5.25 per cent, costing $894, Invis said.
Within hours of the Bank of Canada's announcement Tuesday, mortgage lenders were already posting new variable mortgage rates that were up by a quarter of a per cent.
"Every time something happens with the rates, there are people who decide, instead of going variable, to go fixed," said Jim Rawson, a regional sales manager for Invis working in downtown Toronto.
But he said economists don't expect the Bank of Canada to continue its credit-tightening policy for much longer.
"It may be a blip in the market and, therefore, you may not need to worry about going into a fixed term if you're used to playing the variable game."
"There's really no need to panic. For those who are finding that it may be a bit of a pinch, there are things like longer amortizations."
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