Renewing your mortgage? Here’s what to know as the Bank of Canada raises rates
Global News
Experts say it’s now time to take a step back and really take stock of your finances, but don't be afraid to shop around to ensure you get the lowest mortgage rate at renewal.
If your mortgage is up for renewal in the coming months, you may be beginning to panic at the prospect of paying more to finance your home as the Bank of Canada continues its interest rate hiking cycle.
The Bank of Canada hiked its overnight rate by half of a percentage point Wednesday, bringing it to 3.75 per cent.
Experts say it’s now time to take a step back and really take stock of your household situation, but don’t be afraid to shop around to ensure you get the lowest mortgage rate at renewal.
“What you do will depend on how tight your finances are, how close you are to finishing paying off your mortgage, how quickly you can plan on paying it down, and what your outlook is for the economy and rates generally,” said James Laird co-CEO of Ratehub.ca and president of mortgage brokerage CanWise Financial.
Laird said those up for mortgage renewal might be influenced to just stay with their existing lender to avoid having to go through the mortgage stress test process again with a new lender.
“The problem with this is it means people are less likely to shop around and get themselves the best rate. People should not be deterred from shopping around. Many people will still pass. If you could pass a stress test five years ago, you can pass it now, probably,” he said.
The mortgage stress test was first introduced in 2016 and new rules came into effect last year.
Most mortgage holders in Canada have a mortgage term of five years or less, whether its a fixed-rate or variable-rate mortgage. And while borrowers with a fixed-rate mortgage have generally benefitted from some stability amid rising interest rates compared to their variable-rate mortgage counterparts who have felt the immediate impact of hikes, those with fixed-rate mortgages will see their monthly mortgage payments jump significantly as they gear up to renew.
