Rising Interest Rates – Best Course Of Action For Home Buyers

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The Bank of Canada has now raised the mortgage interest rates twice in two months:  July and August 2017.  The Bank of Canada rate has gone from 0.5%, to 0.75% and now one full percent.

Mortgage Lender rates have, of course, kept pace with these increases.  This means that 5-yr locked-in mortgage interest rates which were normally around 2.7% are now around 3.2%.

That 1/2% increase means approximately $80 per month more on a mortgage of an average house in Winnipeg (value pegged at $315,000 in July 2017).  If House and Condo buyers may be tempted to wait for interest rates to drop again before taking the plunge, here is a solid reason why buying sooner, rather than later, may be a better course of action.  Rates are not likely to come back down soon.  In fact, when viewed over a longer history, we can see that they may actually still go up.

Lets take a look at some historical data.  Many buyers, especially First Time Buyers, might just look back over the past year and see that the Bank Rate sat at 0.5% the entire time.

Bank Rate on the Rise

Seen in this context, an observer can be forgiven for concluding that after the recent increases, now might be a ‘bad time to buy’ .  But lets look back a few years.

Rising Interest Rates - Best Course Of Action For Home Buyers mortgage interest rates

In this context, we see that the 0.5% rate was really just a recent phenomenon.  Yes, it made for a “Fantastic” time to buy a home.  Our recent increase merely brought us back to the 1% level.  Lets look a little further back, going to the 1990’s.

Rising Interest Rates - Best Course Of Action For Home Buyers mortgage interest rates

Even if we ignore the 10% rate from the early 1990’s, we can see that a rate of 4-6% was common for many years.  This puts the 1% rate we have now into a better light.

So what should a potential Home Buyer do?

First, contact a real estate agent who can recommend a suitable lender.  In fact, simply follow these 6 steps to assuring your home buying success. 

One of the steps will include being pre-approved by a lender who offers a rate-lock for 90-120 days.  This feature protects the home buyer from further interest rate hikes during the time frame, while they are looking for a home.

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