Today's mortgage rates remain to be extremely low due to the uncertainity in the global market (risk of Greece defaulting), anemic job creation in the US and massive government debts and deficits. In Canada, we have been lucky not to experience the pain of our neighbours to the south or across the pond in Europe. Fixed mortgage interest rates are hovering in the mid to high 3% which are historically low. Over the last 25 years, fixed rates average around 6% (see chart below which shows posted rates. Typically, there is 1.5% difference between posted and discounted)
It is important to budget ahead for the time when mortgages are up for renewal at the 6% level. Inflation hedge strategy, is a pro-active plan where the mortgage is reviewed annually and adjusted according to the projected renewal rate. This strategy saves the borrower thousands of interest dollars and accelerates paying down the mortgage principal. At renewal, the borrower's mortgage balance is reduced and adjusted for higher interest rate environment eliminating any payment shock.
For variable mortgage holders, the savings are even greater, since the mortgage is paid at the fixed interest rate level which contributes more monies towards paying down the mortgage principal.
For your personal mortgage review and inflation hedge analysis, please contact me.