What began as a couple of pneumonia cases at the last part of 2019 in Wuhan, China, has immediately spread around the world, formally turning into a pandemic in March 2020. Obviously, I’m discussing COVID-19, normally known as Coronavirus. From that point forward, more than 2,000,000 individuals have passed on and just about 95 million individuals have been contaminated around the world.
Covid isn’t only a medical problem, it’s also a financial issue. Coronavirus has made huge number of Canadians lose their jobs and many businesses to go under. As well as influencing the stock market, travel, consumer prices and investments, it’s likewise influencing the mortgage rates in Canada.
Fixed versus variable mortgages
There is a great deal to think about mortgages, however, there are two main types of mortgage rates: fixed and variable. With mortgage rates as its name recommends your home loan rate and home loan installment are fixed or continue as before for the span of your home loan term. This is not quite the same as the other kind, variable rate. With variable mortgage rates, your home loan rate and home loan installment can possibly change anytime during your home loan term.
As these rates are reliant on Government of Canada Bond Yields and the Bank of Canada, the Coronavirus is unquestionably influencing mortgage rates.
What’s new with the Government of Canada bond yields?
There is an immediate connection between Government of Canada bond yields and fixed mortgage rates. At the point when Government of Canada bond yields fall, so do fixed mortgage rates and vice-versa.
When valuing fixed mortgage rates, lenders do it dependent on Government of Canada bond yields of comparative length. For instance, the rates on five-year fixed-rate mortgages depend on the paces of five-year Government of Canada bond yields.
Government of Canada bond yields have been drifting almost a record low since the time March 2020 when bond yields dove because of the worsening Coronavirus situation.
There was a short time right off the bat in 2020 when fixed mortgage rates increased pointedly. This was because of liquidity concerns in the market. Liquidity refers to how effectively and economically mortgage lenders can borrow money. Banks were worried about the absence of liquidity in the market.
To help set the minds of lenders at ease, the Bank of Canada presented the Canada Mortgage Bond Purchase Program. Since the time March 2020, the Bank of Canada began forcefully purchasing mortgage bonds from lenders. This appears to have quieted lenders’ minds. Mortgage rates consistently diminished all through 2020, arriving at record lows. The low mortgage rates we’re seeing right currently are even lower than during the monetary emergency regarding 10 years prior. You would now be able to sort a five-year fixed-rate under two percent, something unfathomable before the pandemic.
The Bank of Canada halted its bond-buying program in late October 2020. There were fears that fixed mortgage rates would increment, yet those feelings of dread don’t appear to have happened as intended. Although mortgage rates are not falling as before, we’ve seen slight reductions with lenders in the course of the most recent couple of months, as Canadians keep on appreciating record low fixed mortgage rates.
In spite of the fact that I don’t expect fixed mortgage rates to go up at any point in the near future, it’s truly conceivable that fixed mortgage rates could begin to trend upwards sooner or later in 2021. It relies upon how well the COVID-19 vaccines rollout goes and how rapidly the economy recuperates. On the off chance that the vaccine rollout works out positively and the economy skips back faster than expected, we could see fixed mortgage rates begin to go up in the coming months. The odds of fixed mortgage rates going up in 2021 are 50/50 now.
What should I do?
If you are a homeowner with an existing fixed mortgage rate, you should contact your mortgage broker and check if it is advantageous to break your mortgage and lock in at a lower rate. In spite of the fact that mortgage penalties will in general be higher when fixed mortgage rates drop, the interest savings from a lower mortgage rate may more than offset the penalty of breaking your mortgage. Likewise, in the event that you have high-interest debt, you should seriously consider refinancing your mortgage and securing it at a low rate. Paying under three percent on credit card debt by rolling it into your mortgage is much better compared to 19 percent or more.
In case you’re a homebuyer, presently is an amazing time to go with a fixed-rate mortgage. With fixed mortgage rates at or near historic lows, you can secure at a super low rate and know precisely what your home loan installment and rate will be for the years to come.
With the Government of Canada’s bond yield rates and fixed mortgage rates at or close to record lows, you could be paying considerably less on mortgage if you refinance.
If you are looking to refinance or purchase a home over the next few months, contact us today at 877-296-2696 or email us at email@example.com.