Victoria real estate purchasers wonder how low can rates go?

January 27, 2012

How low can rates go? For many Victoria homeowners and Victoria real estate purchasers, it’s never looked more attractive to lock in their mortgage rate for five years. However, recent news that the U.S. Federal Reserve won’t be hiking rates until the end of 2014 should make homeowners – and aspiring owners - think twice.
The Bank of Montreal rocked the Canadian mortgage world with its 2.99% rate on a five-year fixed rate mortgage (the offer ended Jan. 25, 2012). It was the lowest in Canadian history for that term. While the BMO deal had several catches (namely 25-year amortization and prepayment terms of only 10% of the mortgage per year) it forced the hand of a number of other banks to lower their rates as well.
For many homeowners and real estate buyers, these low long-term rates make variable and floating rates pointless. After all, the prime rate at most financial institutions are 3% with the discount for variable only 20 basis points. This is thin gruel for not locking in and risking a future spike.
However, some feel the bottom has not been reached. According to Canadian Mortgage Trends, the U.S. Fed’s announcement is a strong indicator that short-term rates are not going up anytime soon. This makes locking in less attractive. For the lock in prone, Canadian Mortgage Trends editor Rob McLister suggests locking in for one year at a fixed rate now available for as low as 2.49%.
McLister doesn’t think there is much more room for the five-year fixed rate mortgage to go down with 2.85% the bottom based on lenders wanting a 150 basis point profit.


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