Bond Yields Take A Dive! What Does This Mean For Your Mortgage?

The Canadian mortgage market has been experiencing a very turbulent time since March of 2022. The interest rates have seen overnight increases from The Bank of Canada. Let us roll over back to 2020 in order to understand today’s situation better. The COVID 19 pandemic forced countries to enforce lockdowns and this resulted in massive economic crashes across the globe.

The Canadian government decided to tackle this situation by decreasing the interest rates to a record low. This initially paid dividends as people flocked to the real estate market and demand soared. This massive demand for real estate eventually caught up with the availability and started causing shortages. With interest rates this low, the demand never slowed down causing the property rates to rise steeply. This started the inflation wave in Canada and now to control this situation, the government started spiking the interest rates to slow down the market. The bond yields took a dive over 30 basis points on Friday and now the fixed mortgage rates fell to 2.84%, which were 3.15% a day earlier. Market analysts see this as the early signs of the inevitable recession.

Effects on Fixed Mortgage Rates

Well this is still early to make any predictions but still experts believe that the fixed mortgage rates might experience a further dip in near future. Still inflation can not be so simply dealt with a single financial instrument as it has more complexities to it.

Effects on Variable Mortgage Rates

Variable mortgage rates do not seem to be slowing down anytime soon with The Bank of Canada set to increase overnight rates again at its next meeting. Based on recent calculations the average monthly mortgage payment has increased by more than $1100 over the past 10 months.

What should you do?

We understand this is a very technical set of information’s to dump on anyone in a pinch. These are quite turbulent times and we would strongly suggest consulting an expert on the matter. A mortgage broker with good knowledge can successfully guide you through this. As they have the industry insider information, they are always in a much better position to make decisions for you.

Mr. Pankaj Aggarwal from Mortgage Alliance is an industry stalwart with years of experience and sound knowledge. He has guided his innumerable clients to financial safety and a beautiful home, which they can call theirs.

You can make your dream of buying a home come true with Mortgage Alliance , even in the current chaotic economic circumstances. We are here to help you, book a free consultation now!

Riding the inflation wave

Canada is currently facing problems with inflation as interest rates have peaked to a 30 year record. This has caused a lot of commotion in the market and now The Bank of Canada has come forward to outline a few of the vulnerabilities of Canada’s financial future.

In a big statement, The Bank of Canada made a prediction that some of the mortgage payments may see an increase of up to 45% by the year 2025. The Bank of Canada conducted a review of the financial system and released a report on 9th June 2022. The review report states that Canadians are likely to face a problem with housing affordability.

In a simulation run for the review, it stated that those who took out a mortgage in 2020-21 would face massive trouble in the form of monthly mortgage payments, seeing an increase of up to 44% with their 2025-26 renewal. If their mortgage to income ratio is high, this rate could climb to 45%.

Even those with fixed rate mortgages could see a jump of up to 24% with their mortgage renewals and that rate could reach 26% if their mortgage to income ratio is considered high.

This is some troubling news for everyone, as a lot of people had bought property with mortgages when the interest rates dipped to record low in 2020. The housing market was climbing slowly and regularly until pandemic took the world by storm and every economic system halted. This was the first time, for what we consider our modern world, stood completely still. To kick start the economy back into action, the Canadian government reduced interest rates, invoking everyone’s attention towards real estate market.

The housing market saw a frenzy that was never witnessed before. Everyone wanted a piece of the low interest pie. The overcrowding in the housing market meant that demand was always going to be higher than supply and this was always going to result in price hikes. Even people with properties started thinking about selling, to take advantage of the recent price hikes and started overpricing. Even then people kept buying because of the record low rates.

Now this news brought to light by The Bank of Canada will financially trouble all these buyers who were never prepared to see such steep interest rate increases. People are already worried as to how they are now going to survive this inflation wave. With limited incomes and ever increasing interest rates, more and more people will be financially suffocated to sell off their properties.

A good mortgage broker is crucial in such circumstances. As they have the skills and experience to tackle such intricate challenges and to survive financial turmoils. They can assist their clients to successfully navigate these troubling waters to keep afloat and have a comfortable future. They are the professionals that can help consumers ride this wave of inflation, by helping them make the right decisions. Decisions like choosing between fixed rate and variable rate mortgages, when to buy and so on.

My Mortgage Consultant is your best bet when it comes to taking financial advice and finding the best mortgage. Pankaj Aggarwal, our best broker, has in-depth understanding of market conditions and a natural talent of reading the industry trends. If you are looking to buy a home for yourself, he is the person you want to consult. He can safeguard you from future market inconsistencies while getting the best deals for you to make your dream a reality. Don’t hold your decision to buy a home. Just book a free consultation to get your doubts cleared.