Mortgage Rates Canada – August 2022 Update – Fixed Rates DROP for 2nd Month in a Row

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Thanks for clicking canada’s mortgage rates are down this month as bond yields fell midway through the month with investors hoping the bank of canada would be reversing rates in the short to midterm future you’re going to be very disappointed while bond yields the amount of money that can be made off of government of canada bond have risen since the release of

Canada’s inflation rate last week fixed mortgage rates are still down from june and july but what about variable rates the bank of canada is set to raise interest rates next month by a minimum of 50 basis points with many predicting it will be more like 75 basis points which will make variable rate mortgages even more expensive leaving some to wonder whether or

Not fixed rate mortgages are the best option so what i want to do today is go over the best fix rates compared with last month see how they compare with variable rates especially in light of the upcoming rate hikes and then take a look at some things to think about when choosing variable or fixed rate mortgages as we’ll see in a few minutes these interest rate

Hikes are expected to continue for some time which will continue to put downward pressure on canada’s real estate market we’ll continue to have updates out on those rate hikes on this channel click like and subscribe to get those updates but for now let’s get into these mortgage rates first off the best insured mortgage rate if you’ll remember an insured mortgage

Rate is where you have less than 20 down have a 25-year amortization qualify at 5.25 for the contract rate plus 2 and you pay the mortgage insurance the best insured mortgage rate was down this month from the previous two months with june having a 4.99 interest rate july having a 4.64 interest rate and the best five-year insured rate this month was 4.44 or 0.2

Percent higher than it was last month and this was also echoed in the best five-year insurable mortgage rate an insurable mortgage rate if you’ll remember is where you have 20 down qualify at a 25-year amortization and you don’t pay the mortgage insurance insurable rates are also down if you remember in june the best insurable rate was 5.39 which shrunk down to

4.99 in july and as of this video are down to 4.79 so insured rates insurable rates both down 0.2 percent or 20 basis points from this point in time last month but the same cannot be said for uninsurable mortgage rates an uninsurable mortgage rate that is where you have a 30-year amortization or you take money out of your house via a refinance an equity takeout

Etc if you’ll remember in june the best uninsurable rate was 5.39 which shrunk down to 5.24 in july and that rate has stayed the same this month at 5.24 so while purchases on 25 years either insured or insurable are both down 0.2 percent if you want to take money out of your house or you want to have a 30-year amortization then the rate has remained unchanged but

What about variable rates right now the best five-year variable rate mortgage is prime minus 1.05 with prime being 4.7 that gives the borrower a rate of 3.65 right now so 3.65 right now on a variable mortgage rate compared to 4.44 on a fixed rate but what does this do to mortgage payments just as an example let’s take a look at july’s average house price of 629

971 dollars if we take that 630k house price and we use a 25-year amortization at a 4.44 interest rate we get a monthly mortgage payment of 3401 that same scenario using a variable interest rate at prime minus 1.05 or 3.65 percent gives us a mortgage payment of 3131 so right now the average buyer saves about 270 dollars per month by going with a variable rate

Mortgage however if the bank of canada raises rates by 50 basis points next month that brings that mortgage rate up to 4.15 which bumps that mortgage payment up to 3 300 or 100 less than the current fixed rate and if the bank of canada bounce rates up by 75 basis points that payment goes up to 3 387 or about 14 less than the current fixed rate that escalated

Quickly as we just saw the financial advantages of a variable rate mortgage can evaporate very quickly in an environment of rising interest rates as of right now if you choose a variable rate mortgage over that of a fixed rate you really are betting that the bank of canada will be reversing its course on mortgage rates in the short to mid term future in order to

Realize the gains of that variable rate mortgage and the bet that the bank of canada will reverse course is almost impossible to quantify as nobody has any idea where interest rates or the inflation rate will be in one year’s time let alone two three four years time when canada’s real estate market hit its peak in february of this year the average house price was

Eight hundred and sixteen thousand seven hundred and twenty dollars at that time a decent variable rate was prime minus point seven five or one point seven buying that average house price in february of this year would have entailed a mortgage payment of three thousand two hundred and thirty six dollars however with prime having risen from two point four five to

Four point seven that payment has now gone up to four thousand one hundred and fifty dollars so that’s nearly a one thousand dollar difference in mortgage payments in just over six months so you have to ask yourself if you can afford those mortgage payments if rates continue to go up if rates continue to go up another one or two or even three percent over the next

Year to three years you really have to ask yourself if you can take the swings and mortgage payments as we said nobody knows for sure where interest rates will be in a year’s time at this point in time last year our inflation rate was at 3.7 percent which everybody thought was sky high and the bank of canada said it would be temporary one year later i’m sure bank

Of canada governor tiff macklin would give his right arm for a 3.7 percent inflation rate so things can change very quickly and you want to make sure that your budget can handle the swings if they do with that said we will continue to track those swings and those changes in the mortgage rates in the bank of canada’s interest rate policy on this channel if you want

To get those updates make sure you click like and subscribe but for now thanks so much for watching

Transcribed from video
Mortgage Rates Canada – August 2022 Update – Fixed Rates DROP for 2nd Month in a Row By Mark Mitchell – Mortgage Broker London Ontario