Another record month for the KW Real Estate market in April.
Read full media report:
http://www.kwreb.on.ca/Stats/April_2010_Media_Release.pdf
Another great month....prices up, number of properties sold up....and....wait.....interest rates up? Yes, that's right! Interest rates up as well.
Interest rates have been a topic of many conversations lately as the indications are there that they will be going up. So, here's my take on things. A few things are true....Variable rates will always be cheaper than their counterpart 5 yr fixed rates. Another is that over time, historically those who choose to go with a variable rate will normally save themselves money. The question is will the variable rate of 1, 2, 3 years from now still be cheaper than the going 5 yr rates today? In other words....do I stay variable or lock in at a fixed rate?
If you've worked with me before you know one of my regular sayings is "I don't have a crystal ball but....."...but in my opinion interest rates only have one direction to go....UP! There's a lot more room for them to go up than to go down. I don't think we will see the 18-23% rates previous generations got to experience, but I personally do think that we may see 7-9% again. I should probably add in my disclaimer here that I am not an economist or a mortgage specialist. But the indicators are there, deflationary period predictions, Bank of Canada indicating they will raise their prime rate come June, a struggling world economy.
Regardless of which route you choose here are a few things to consider.
1) Affordability. Variable rates are great right now, but take a look at your mortgage payments and make sure that if interest rates rise you'll still be able to afford your home. Don't purchase a home on a variable rate that you can barely afford....you may run into trouble in the long run.
2) Education. Keep yourself educated. Find a great Mortgage Specialist who can keep you up to date on the going rates and the upcoming trends. This is essential if sticking with a variable rate. You don't want to find yourself behind the 8 ball because you weren't paying attention to what the rates were doing! When making your mortgage choices it's important to sit down with a mortgage specialist you trust who can help you decide which route is best for you.
3) Personality. As strange as it sounds, I feel strongly about this one. What kind of mortgage you choose will reflect your personality to some degree. The rise and falls of a variable rate are not for everyone. How you deal with stress will give you some indicator as to whether it's for you or not. This is really another area a great mortgage specialist can help.
Now on a personal note......I've enjoyed a variable rate with a cap for a number of years and have saved ourselves a lot of money going this route as opposed to a fixed 5 yr rate. When it came time to renew last year it looked like rates were staying down for a while longer so we threw it on a line of credit and enjoyed super-low rates for a while. Last month when rates went up and the indicators showed they will likely go up again when the Bank of Canada increases their rate this summer, we locked in just before they went up. We were able to lock in for a 5yr fixed at 3.65%. No crystal ball here, but here's hoping!
If you'd like to be put in touch with a great mortgage specialist let me know!
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