Variable Mortgage Rates Might Go Higher Than Fixed Rates After Bank Of Canada October Rate Hike!

Variable Mortgage Rates Might Go Higher Than Fixed Rates After Bank Of Canada October Rate Hike!

The last bank of canada hike in september increased a lot of variable mortgage payments because the trigger rate hit and next week’s rate hike on october 26th might have something just as big because it looks like variable rates might actually go higher than fixed rates so in this video let’s look to see what’s going on and more importantly what this means for you as

The real estate investor but before i continue if you enjoy content like this don’t forget to give this video a thumbs up and subscribe to our channel so you see more videos like this made specifically for real estate investors in toronto variable mortgage rates are usually lower than fixed rates at the start of your mortgage and historically your cost of borrowing

What the variable mortgage is also less than a fixed rate mortgage over your borrowing term and the reason for this is kind of like insurance fixed rates give you more certainty and so you end up paying a bit of a premium on it now we all know interest rates have been going up quickly and fixed rates have been leading the pact with the increases since the end of

Last year even before bank of canada started increasing rates the reason for this is because fixed rates are based off of the bond market and simply speaking the market tries to figure out where rates are going in the next five years and they take an average of that to get the bond yield with inflation still looking strong there was a collapse in the uk sterling

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Which surged uk borrowing costs and then our bond yields also went up with it but it actually looks like it’s settling down again this is also why five-year fixed rates also edged up last week and now the five-year fixed rate and five-year variable rates are very close with a 30 basis point spread between them right now major banks are expecting a 50 basis point

Rate hike from the bank of canada but given the hike in bond yields last week it looks like the market is now leaning towards a 75 basis point hike this time around what this means is that variable rates which move alongside with bank of canada rate hikes are likely going to go up between 50 to 75 basis points next week and that is actually going to take variable

Rates higher than fixed rates this is a huge turning point in a good way in our opinion the only times when variable rates are higher than fixed rates are usually because rates are expected to come down and it’s probably peaking take a look at this chart from rate hub that compares 5 five-year discounted fixed rates with five-year variable rates since 2006. as

You can see variable rates are typically lower than fixed rates but there are a few instances where it wasn’t and what happened after that is that variable rates ended up coming down soon after there are a couple key takeaways from all of this if your first question is what type of mortgage should i go with then i would point you to my other video that talks all

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About that and it really still applies even though it was filmed a few weeks ago sure past performance doesn’t imply future results and the bond market might not be right either but there is a good chance that you would be better off going with variable if you believe rates are actually peaking of course the uncertainty is still there and it does look like a good

Balance of risk and reward might be to go with a shorter one or two year fixed rate i do know that major banks are still offering rates under five percent for these rates until the end of october which does sound pretty good these days but more importantly based on what we’re seeing right now i would say that the interest rate risk that real estate investors have

Feared over the past year is coming down and this has been a key factor that has been putting investors on the sidelines the truth is higher interest rates don’t mean real estate investing doesn’t make sense you just need it to be at the right price so that the numbers still work as long as you can get good positive cash flow at higher interest rates it’s still

Fundamentally a strong investment and it’s actually better than normal because you’ve gotten major discounts in order to get the numbers to work at higher interest rates and once borrowing it’s come down your cash flows will look even better and when property values recover the cherry on top is that you will see better appreciation because of your deep discounts

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Now as we see more and more signs that rates are leveling off investor demand is going to come back and we expect a quicker bottoming out in the investment property market compared to the end user market in toronto so this really is the best time to see what you can get before everyone else hops back on the bandwagon and if you’re looking to get started and you

Need help with this our team is here for you we’re a real estate sales broker that focuses on investing in real estate in toronto and when you work with us we take the time to understand your needs teach you the ropes show you the best deals and eventually help you buy the best one for you but that’s not all our team also provides renovations guidance leasing and

Property management if you need it so just connect with us if you want to learn more about our services by heading to the link in the description below don’t forget to give this video a thumbs up and look for us on facebook instagram or linkedin if you want to hear from us more regularly i wish you all the best in your real estate investing journey thanks so much

For watching and i’ll see you in the next video bye

Transcribed from video
Variable Mortgage Rates Might Go Higher Than Fixed Rates After Bank Of Canada October Rate Hike! By Elevate Realty