Even though the Bank of Canada isn’t expected to begin raising its overnight lending rate until the second half of 2014, other interest rates, including longer-term mortgage rates, can rise ahead of the Bank of Canada, and have been.
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Toronto, Canada (PRWEB) July 10, 2013
Canadalend.com, the leading low-cost private mortgage solution provider in Canada, is issuing a warning to first-time home buyers about sustained mortgage rate hikes and that they may need to rethink their outlook in light of an improving North American economy.
A recent poll shows that 31% of first-time Canadian home buyers expect interest rates to remain stable over the next five years. With the Bank of Canada keeping its key lending rate at one percent, many Canadians may be getting accustomed to near-record low interest rates. This is especially in light of the fact that the Bank of Canada has held its overnight rate at one percent since 2010; the longest period of unchanged interest rates in more than 50 years. (Source: BMO press release, “BMO First-Time Home Buyer's Report: One-Third Expect Interest Rates to Remain the Same Over the Next Five Years,” July 6, 2013; http://finance.yahoo.com/news/repeat-bmo-first-time-home-100000683.html.)
“Even though the Bank of Canada isn’t expected to begin raising its overnight lending rate until the second half of 2014, other interest rates, including longer-term mortgage rates, can rise ahead of the Bank of Canada, and have been,” says Bob Aggarwal, president of Canadalend.com.
According to Canadalend.com, the average yield on five- to 10-year Canadian bonds has gone from 1.4% at the beginning of May to around 2.3%, a short-term increase of 64%. The major banks had been selling their five-year fixed rates below 2.99%; all that changed on June 10, when the Royal Bank of Canada (RBC) raised its residential five-year fixed rate to 3.29%. Today, RBC’s five-year fixed mortgage rate is at 5.14%—in less than one month, RBC has raised its five-year fixed mortgage interest rate 72%. (Sources: bankofcanada.ca, “Selected Bond Yields - Government of Canada marketable bonds - average yield - 5 to 10 year,” July 8, 2013, http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/; rbcroyalbank.com, “Mortgage Rates,” July 8, 2013; http://www.rbcroyalbank.com/mortgages/mortgage-rates.html.)
Unfortunately, says Aggarwal, rising interest rates, coupled with federally mandated tighter lending rules—including reducing the amortization period for insured mortgages to 25 years and lowering the maximum mortgage amount for refinancing—have many prospective buyers saying they are waiting longer to buy their first home.
“With the big banks putting an end to record low long-term mortgage rates, those first-time homeowners ready to enter the marketplace can still lock in on historically low rates by getting pre-approved today,” says Aggarwal. “First-time homeowners looking to get the best rates should use a mortgage brokerage like Canadalend.com. Instead of going to banks, which only sell their own products, the independent licensed agents at Canadalend.com draw from all lenders who provide mortgage products. Those looking to buy a home can try Canadalend.com’s mortgage calculator to see how much they can afford.”
Canadalend.com is one of the largest, most trusted private mortgage brokers in Canada, with skilled independent, licensed professionals helping Canadians coast-to-coast. Canadalend.com provides its clients with residential and commercial mortgages, home equity credit, debt consolidation, and financing concerns. To learn more about Canadalend.com, visit the web site at http://www.Canadalend.com.