For a while, mortgage rates in Canada have been steady and below 3%. That all changed quickly:
- Early June, it was announced 95,000 jobs were created in the month of May in Canada
- Mid June: US Federal Reserve chairman, Ben Bernanke, suggested the bond buying program would slow down towards the end of 2013 as the US economy is showing signs of recovery.
The chairman's statement set off a bond selling frenzy since mid June which resulted in sharp increases in bond yields. Remember, bond yields increase with good economic news. As investors move their monies from very secure low risk bonds, yields increase to entice investments back into the bond market. The higher bond yields drive fixed mortgage rates higher.
Mortgage rates have increased from 2.89% to 3.39% in a short period of time. Timing an unpredictable market is difficult and can be risky. Now that mortgage rates have increased and further upward pressure is expected as the US bond buying program slows down, planning for higher mortgage rates at renewal is a prudent financial approach. Are you ready for higher mortgage rates?
To find out about adjusting your mortgage for higher interest rates, absorbing payment shock at renewal and reducing effective amortization, please visit www.iMortgageToronto.ca