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Canada’s Finance Minister, Jim Flaherty, has said interest rates, which have been artificially kept near-record lows since September 2010, are going to go up over the long term, regardless of what international central banks do.

Because the Canadian and U.S. economies and monetary policies are closely linked, Canada’s mortgage rates tend to run closely with the U.S. housing market. For example, in January 2008, before the U.S. housing market crashed, the interest rate on a Canadian five-year fixed mortgage was 5.89%; today, five-year fixed rates are being offered near 3.79%.

South of the border, in January 2008, a five-year fixed mortgage was offered at 5.45%; today, they are hovering near 3.02%. The Federal Reserve has said it will keep its federal funds rate (which mortgage rates are based on) near zero until the economy improves. That means the Fed is waiting for an unemployment rate near 6.5%; currently, 7.3% of Americans are unemployed.

That said, economists within the Federal Reserve have said they would like to see interest rates kept low until the U.S. unemployment rate drops to 5.5%. On top of that, interest rates should be kept below normal (two percent) until at least 2020.

Meanwhile, the European Central Bank unexpectedly cut its benchmark rate to a record low 0.25% recently, in an effort to prevent the eurozone from slipping back into a recession, and would do so until at least 2015.

Back here in Canada, many have become accustomed to the near-record low interest rate environment. This has helped propel Canada’s biggest housing market higher: sales in the Greater Toronto Area (GTA) jumped by more than 19% year-over-year in October, while home sales increased from 6,713 last October to 8,000 this year. Prices have also been running in step. The average sale price in the GTA was $539,058, up 7.4% from the same period in 2012.

Prices were also strong on the other end of the country. In Vancouver, sales were up 37.8% year-over-year in October and an incredible 7.2% in September. Unlike the GTA, home prices in the Greater Vancouver Area slipped 0.5% year-over-year to $600,700.

On one hand, the Canadian government said it would intervene in the housing market only if it saw bubble-like indicators, which it says are not present right now. On the other hand, the Canadian economy isn’t doing so well that the Bank of Canada can raise its interest rates.

But it will—the question is, when?

The rise in interest rates could negatively impact those who have become accustomed to a low interest rate environment. The mortgage experts at Canadalend.com think it’s important to warn Canadians to be careful when taking on debt, since the cost of borrowing it will eventually start to rise; cutting into their daily expenses.

Whether you’re a first-time home buyer looking to get on the property ladder or you’re looking for a second mortgage or loan, it’s important to work with a mortgage brokerage that has a history of helping their clients achieve both their short- and long-term financial goals.

The licensed, independent agents at Canadalend.com do everything they can to ensure their clients make the most informed decision possible when it comes to getting a mortgage or loan. Canadalend.com agents help their clients get on a stronger financial footing.

There are a lot of different things to consider when it comes to finding your dream home: price range, ranch, bungalow, brick, mid-century modern, the number of bedrooms and bathrooms, whether you want a big backyard…the options are almost endless.

While shopping for a dream home is supposed to be fun, not many people feel the same when it comes to shopping for a mortgage. But since a home is probably the largest single purchase most Canadians will ever make, the experts at Canadalend.com believe it’s important for first-time home buyers to have a solid understanding of what to look for when it comes to finding the best mortgage.

Knowing what to consider can help home buyers better understand their financing options, which in turn will have a direct impact on their overall monthly costs. Knowing your options could also help you save tens of thousands of dollars in interest over the life of the mortgage, ultimately, helping you plan for a better future.

Down Payments – At Canadalend.com, we know that when it comes to the down payment, more is better. To get a conventional mortgage (one that does not exceed 80% of the purchase price), home buyers in Canada need to come up with a 20% down payment.

There are many benefits to having a larger down payment. Most significantly, it reduces the amount of your monthly principal and interest payment. It also decreases the amount of interest you pay over the life of your mortgage.

That said, life can be full of challenges, making it difficult to save up the full 20%. That said, you can still purchase a home in Canada with as little as a five percent down payment. Doing so, however, means getting a high-ratio mortgage, which entails purchasing default insurance, the cost of which is charged to the buyer as a closing cost or financed through the mortgage.

Mortgage Options – Interest rates are only one consideration when it comes to getting a mortgage. The independent licensed agents at Canadalend.com can show you a wide range of mortgage options and help you select one that best suits your lifestyle needs.

Fixed versus variable interest rate – With a fixed interest rate mortgage, homeowners get stability, as the interest rate and monthly payments stay the same throughout the term of the mortgage. With a variable interest rate mortgage, homeowners are susceptible to changing interest rates; if it goes down, you pay more on the principle, and if it goes up, more goes to interest. A variable interest rate mortgage opens the window to potential savings if interest rates go down.

Open versus closed mortgage – A closed mortgage has a specific term—anywhere from six months to 10 years. Closed mortgages also have limits on when they can be refinanced or renegotiated, and there may be charges if you do either one earlier than expected. An open mortgage is often negotiated for a shorter period and can be paid off at any time; this flexibility usually comes with higher interest rates.

Accelerated Payment Option – The faster you pay off your mortgage, the less you pay in interest. Homeowners can save money by choosing an accelerated payment plan (weekly, bi-weekly) or a shorter amortization period. It all comes down to lifestyle.

A shorter amortization period will mean higher monthly payments; the quicker you pay off your mortgage, the less you pay in interest. A longer amortization period, on the other hand, means paying less each month, freeing up much-needed cash.

While it’s important to get the lowest interest rate possible, there’s a lot more to consider when it comes to selecting a mortgage.

As the country’s leading low-cost private mortgage solution provider , Canadalend.com agents draw from hundreds of banks and lenders to help you secure the financial products best suited to your financial needs. If you are interested in obtaining a home mortgage or even want to know what your options are, visit Canadalend.com or apply online.

Your home is probably the single most valuable item you will ever purchase. Not only will it be the most expensive item you will probably ever buy, but you will also need to spend a lot of additional money on upkeep, renovations, etc. On top of that, it’s quite possible you’ll live in it for five, 10, 20, or even 30+ years.

With so much at stake, it’s important to be as well-informed as possible before you sign the dotted line and lay out the welcome mat. That includes finding out what kind of mortgage you want to consider (fixed or variable) and how much you qualify for. It also means considering current interest rates.

In early 2013, Canada’s big banks were offering five-year fixed mortgages with interest rates of 2.99%; by Labour Day, they were near 3.89%. With mortgage rates on the rise, many first-time home buyers fear that affordability will be out of reach.

That doesn’t mean you should jump into the markets and buy a home just because interest rates are on the rise. But that’s exactly what many Canadians are doing! Fearing the end of low mortgage rates has sent Canadian home shoppers into a buying frenzy.

Using their near-record low pre-approved mortgage rates, home buyers sent Canadian August sales up 50% in some regions. The Toronto area experienced a 21% year-over-year sales jump in existing home sales; Vancouver was up 52.5%; Calgary, 27.5%; Victoria, 20.7%; and Edmonton, 9.9%.

Despite the recent rise in interest rates, it’s important to remember that five-year mortgage rates are still well below their historic average. Because the Canadian and U.S. economies and monetary policies are closely linked, it’s also good to remember that Canada’s mortgage rates run closely with the U.S. housing market. In January 2008, before the U.S. housing market crashed, the interest rate on a Canadian five-year fixed mortgage was 5.89%.

It might be tempting to jump onto the property ladder to take advantage of near-record low interest rates, but in an excited market, there is also the temptation to overpay for a house just to lock in at a low rate.

There’s more to consider when it comes to buying the home of your dreams than just interest rates. While it’s a major issue, it shouldn’t be the only thing you factor into the equation.

That’s why it’s important for first-time home buyers to work with a respected lender that has their best interest at heart—one that has a proven track record of helping clients successfully navigate the world of home financing.

Whereas banks and other lender institutions will only recommend their own financial products, the independent agents at Canadalend.com will search all of Canada’s banks and lenders, looking for the mortgage best suited to your budgetary and lifestyle needs.

We want you to achieve both your short- and long-term financial goals! At Canadalend.com, we’ll do everything we can to ensure you make the most informed decision possible—one that puts you on a stronger financial footing.

It looks like after years of near-record-low interest rates, Canadians are getting a little too used to easy money. And that could spell “financial headache” for those homeowners unprepared for the coming spike in interest rates.

That interest rate shock may come sooner than most Canadians think. According to a recent report, 31% of Canadians expect interest rates to stay the same over the next five years.1

The Organisation for Economic Co-operation and Development, on the other hand, says the Bank of Canada will probably begin raising the overnight lending rate—which tracks and impacts variable mortgage rates—in the second half of 2014.2

While that timeline might seem like it’s on the distant horizon, it’s important for homeowners to be prepared for the eventual rise in interest rates. While the Bank of Canada has not yet raised the overnight lending rate, it did say the long-term goal is still a “gradual normalization.”

What this means to first-time home buyers or those with mortgages coming up for renewal is that the cost of borrowing is going to gradually increase. Don’t let the word “gradually” fool you; it can add up, and fast!

As a result, buyers should factor this increase into the equation when planning their purchase. In May 2013, Canada’s five big banks were selling five-year closed mortgages near 2.99%; today, its 3.59%. Those 60 basis points translate into higher monthly payments and interest.

For example, back in May 2013, a $500,000 mortgage with a maximum 25-year amortization period at three percent would translate into a monthly payment of $2,366.23. Over five years, $69,346.66 would be paid out in interest.

At 3.59%, that same mortgage now means home buyers are paying out $2,520.16 per month, and over five years, $83,311.64 is paid out in interest. What happens if interest rates rise to five percent? That $500,000 mortgage now costs $2,908.02 per month, with $117,008.94 paid out in interest.

It’s inevitable that interest rates will rise; the big question is, will Canadians be able to handle the higher interest rates? With the awaited rise in interest rates not expected to occur until late 2014, now is the perfect time for first-time home buyers and those up for renewal to “stress test” their mortgage against a higher interest rate and see if they can afford it over the long term.

The experts at Canadalend.com also think it’s a good idea to consider a mortgage with a shorter amortization period. While the monthly payments are higher, the homeowner is mortgage-free sooner and pays out less in interest. A $500,000 mortgage with a five percent interest rate amortized over 20 years means paying $3,258.63 per month, with $114,018.00 going to interest.

First-time home buyers ready to take the first step on the property ladder can get a head start by getting pre-approved for a mortgage. Pre-approval lasts for 120 days and is locked in from the day you start the process. With interest rates rising, Canadalend.com warns that getting pre-approved now could save home buyers thousands of dollars in interest charges.

Whether you’re a home buyer or looking to refinance, a licensed Canadalend.com agent will research all of the major banks and lending institutions to ensure you get the mortgage best suited to meet your financial goals.

Sources:

1. “First-Time Home Buyer’s Report: One-Third Expect Interest Rates to Remain the Same Over the Next Five Years,” Bank of Montreal web site, July 4, 2013; http://newsroom.bmo.com/press-releases/bmo-first-time-home-buyer-s-report-one-third-expe-tsx-bmo-201307040884671001 .

2. Mayeda, A., “Look for rate hikes in late 2014, OECD tells Canada,” Financial Post May 31, 2013; http://business.financialpost.com/2013/05/29/oecd-canada-outlook/.