Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

Bank Of Canada Interest Rates Likely To Remain At Historic Lows Until At Least 2023

With Canadians and the Canadian economy facing an unprecedented level of uncertainty due to the ongoing COVID-19 pandemic, the Bank of Canada has reassured prospective homeowners that its interest rates will remain at a near historic low for several years to come. 

The Bank’s Governing Council released a statement saying that the policy interest rate would be held at its effective lower bound until the economy’s slack is absorbed, so that the 2 percent inflation target is sustainably achieved. Financial experts have analyzed that this likely means that the Bank won’t start raising its rates until around 2023. 

While adjustments to the rates ARE possible, they are unlikely as there is only a small chance that a surge in inflation will justify that the rates are raised within the upcoming years. The Bank predicts that inflation will remain at 0.6% in 2020, 1.2% in 2021 and 1.7% by mid-2022. That means that the fallout from the pandemic should be less evident in the economy by around halfway through 2022.

The reason you are probably reading this article, however, is to find out exactly what these low rates mean for prospective homeowners when making mortgage decisions. 

Most mortgages rates today, including insured 5-year fixed terms, are now available for 2.00%. That is a big difference compared to just a few months ago, when insured 5-year fixed terms were around 2.50% and uninsured ones were hovering closer to 3.00%!

The main question is whether to make use of these low rates at a longer term of 5 to 7 years, or choose a shorter fixed term or variable rate instead – given that existing variable rate mortgage holders have enjoyed big savings thanks to the drop in the prime rate from 3.95% pre-COVID to 2.45% today. However, new variable rate discounts aren’t exactly as competitive.

“Unless you’re able to find a variable rate at least a half-point under the best 5-year fixed rates from fair-penalty lenders, the risk-reward of floating your rate isn’t overly attractive,” writes Rob McLister, founder of RateSpy.com.

“Barring that sort of discount, if the BoC were to hike rates 100 bps in 2023, for example, you’d pay less in a 5-year fixed—assuming you didn’t break the mortgage early.”

Do you have questions about how the current interest rates can affect your mortgage decisions? We’d be happy to walk you through the process so you can make the most informed choice possible. Give Capital Mortgages a call at 613-228-3888 today.

Renew your Mortgage with Ottawa Mortgage Broker: Capital Mortgages

Steps to Get Out of Debt and Buy a Home

Just like purchasing a high-end car, buying a home is considered a notable hallmark of success in today’s modern culture. Nonetheless, first-time home buyers are faced with a myriad of challenges that range from not having sufficient capital for the down payment to wallowing in the murky waters of consumer debt. Unfortunately, there’s no other way around this other than by improving one’s spending habits with the intention to save more money in the long run. And here’s a quick primer on how you can do that.

1. Refrain from Growing your Debt

The first step to saving cash for that crucial initial deposit is doing away with all debt sinkholes. So cancel all additional credit cards; use your debit instead. This will teach you the discipline of earning before spending.

2. Account for your Spending Habits

Where does your hard-earned money go? Take an inventory of all the recurring bills and expenditure that you have to settle every month or year and budget for them accordingly. Strike off the unnecessary ones or substitute them with cheaper alternatives.

3. Settle the Biggest/Most Expensive Debts First

The more time you spend with an expensive debt/loan, the more additional money you’re likely to shell out in the long run. Start servicing your biggest loan as soon as possible while being careful not to pick up another one.

4. Cut Back on your Expenses

Do you know that 70% of the things we religiously spend money on every month are unnecessary and over-rated items of luxury? For instance, you don’t need to buy that $200 designer pair of jeans when you can get almost the same quality and functionality from a $20 pair from the nearest thrift shop. Be smart about how you spend your money and prioritize ‘paying yourself first.’

5. Start, Build and Grow an Emergency Fund
It surprising how a majority of people fancy spending or investing their money to the last cent without stashing away a chunk of it for emergency purposes. Don’t be one of them; life is anything else but predictable.

6. Scour for the Lowest Interest Rates

Ask for a better interest rate from your credit card issuer or drop their card for one with a lower rate. You can later transfer your balance to the new one instead of paying huge wads of cash every month to settle your credit card debt.

7. Document and Track your Progress

So you have managed to save $1500 over the last three months? Good, don’t just stop there, acknowledge the milestone and use as a motivation to try harder, save more money and eventually dropping all unnecessary spending habits.

8. Continue to Service your Debts Without Adding a New One to the Reducing Pile

One of the most common mistakes most people make is picking a new loan/source of debt as soon as they are done clearing another one. This never-ending misery cycle is what prevents most of us from ever tasting the sweetness of true financial freedom.