News says “Mortgage Rates Are Rising”

1. What does this really mean?
2. Who is affected?
3. Does this change the amount of mortgage clients qualify for?

1. What does this really mean?

Let’s use an example to illustrate what this actually means.
On a mortgage of $500,000 with a 25-year amortization and an interest rate of 1.59% the payment per $100K of mortgage is $403.93. The same 25-year mortgage of $500 000, at an interest rate of 1.84%, would mean a payment of $415.77 for every $100K of mortgage.

The difference between the two amounts is an increase of $59.20

A $500,000 mortgage requires $100,000 of pre-tax income, and monthly after-tax income of $6,000, in other words, the $59,20 increase in payment is the equivalent of 1% of monthly household income.
It is up to you to decide how dramatic this 1% of monthly income is for you and your household.

2. Who is affected?

When answering this question, it is important to clarify that when they say that ‘mortgage rates are rising’, they are really referring specifically to a 5 year, fixed-rate mortgage.

You might now be thinking that the Bank of Canada said they were leaving rates alone into 2022 and 2023, and you are correct about that and so far, it seems that is exactly what they are doing.

The talk of increased rates is also “no news” to variable mortgage rate holders.

So, again you might ask, who is affected by this possible increase in rates?

The answer: No one who currently has a mortgage.

The only people who may be affected are those who are shopping for a fixed term mortgage.

One of our lenders has increased fixed rated by 0.25% and reduced variable rates by 0.25% on Feb 26, 2021

Did you miss the boat?

There is no guarantee that fixed rates will not go down.

3. Does this change the amount of mortgage clients qualify for?

No, not until rates will be higher then 2.79%

You are welcome to schedule time in my calendar,  to discuss your options. If none of time frames works for you, please email me or text me on my cell 604.339.1577