In general, strong economic growth tends to lead to higher interest rates, while weak growth leads to low interest rates. A variable rate is directly linked to lender preferential rates, which in turn are directly affected by the Bank of Canada (BoC) reference rate. Variable rates tend to be lower than fixed rates because they carry an exchange risk. In Canada, fixed mortgage rates are largely affected by bond yields, while variable mortgage rates are affected by prime rates.
As a Mortgage Broker in Johns Island SC, I understand that changes in bond yields and prime rates can cause mortgage rates to rise or fall. However, other factors may affect the mortgage rate that applies to you. This may include your financial situation, the type and duration of the mortgage, your location, and the property being mortgaged. This page will analyze how mortgage rates are determined in Canada and what affects them. Compare mortgage rates from different lenders or consider hiring a mortgage broker to get the best possible rate.
Mortgage terms set the interest rate and mortgage conditions for a given period of time and are renegotiated throughout the amortization period in Canada. While prime rates don't directly affect fixed mortgage rates, the cause of changes in prime rates can indirectly affect fixed mortgage rates. A poor credit rating may even disqualify you for some lenders and force you to turn to private mortgage lenders with high mortgage rates. Some people can renew their mortgage early, refinance their mortgage, or even pay it off early.
If you have an variable-rate mortgage and prefer to set your rate at a fixed rate, some variable-rate mortgages allow you to set a fixed rate without penalty. Fixed-rate mortgages and changes in their interest rates are based on Canadian mortgage bond (CMB) yields because many Canadian mortgages are financed through CMB. As of November 6, both five-year fixed mortgage rates and three-year fixed mortgage rates are well above 4% in several homes from the stock market. Unlike fixed mortgage rates, which have an interest rate that stays the same over the term of the mortgage, a variable mortgage has a rate that can change.
Variable mortgage rates are usually above 5.5% in large banks, but are considerably lower in mortgage brokers, where you can find rates of 4.75%. If your mortgage is worth more than 80 percent of the home's value, you'll need to purchase mortgage default insurance. Fixed-rate mortgages guarantee a fixed interest rate over the entire term and, therefore, a payment amount that remains constant over the term of the mortgage. A high-ratio mortgage involves borrowing the principal of a mortgage that is worth more than 80% of the value of a home.
A good mortgage rate is the lowest possible rate you can qualify for based on the amount you need to borrow and the mortgage product that fits your needs. Closed mortgages generally offer lower rates, but they can charge penalties if the borrower renegotiates the rate, makes additional payments, or repays the full amount of mortgage ahead of schedule.
