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Finding the perfect place to call home and settling in can be fun!

Buying your first home is a really big step. And it’s probably going to be the biggest purchase you ever make. While looking for a home is exciting, in this tight real estate market, it’s important to know what kind of mortgage you qualify for before you start the hunt. If you fall in love with a house, chances are someone else has, too. If you aren’t pre-approved for a mortgage, you could lose your dream home to someone who already is.

Understanding the financial side of getting a mortgage can be overwhelming and daunting. There are a lot of things that need to be figured out: how much you qualify for, interest rates, mortgage term (15 years, 20 years, 25 years), payment plans (weekly, bi-weekly, monthly), whether you want a variable or fixed mortgage, and the list goes on.

It can be hard for first-time home buyers to know where to start. After all, a lot of different factors go into determining what kind of mortgage you qualify for. It depends on your income, debt, and credit history. By shopping around and asking questions, you could end up saving yourself tens of thousands of dollars over the term of your mortgage.

Do you go to a bank to get your mortgage? If you do, are you getting the best interest rate? Are the terms and conditions best suited to your economic situation and lifestyle? Or are the banks just going to push their own products and services?

Better yet, do you use a mortgage brokerage like Canadalend.com, whose independent, licensed agents draw from all available mortgage products and provide you with impartial advice?

For the most part, all first-time home buyers want the same things—to maximize what they can borrow, to minimize their interest charges, and to pay off their mortgage as quickly as possible. When it comes to getting your first mortgage, the real difference comes in service and communication.

If you want to find out what kind of house you can afford; compare mortgage terms, rates, and amounts; or figure out how to save thousands by increasing your monthly mortgage payment, try Canadalend.com’s wide variety of interactive financial calculators.

Canadalend.com’s professional agents love working with first-time home buyers, helping them get the mortgage best suited to meet their financial needs and getting them into their dream home.

Canadalend.com’s licensed agents make it easy for first-time buyers to choose the right mortgage. Whether you need a big or small, fixed or variable mortgage, Canadalend.com agents work with all the major banks and lending institutions to get you approved in 24 hours.

A Canadalend.com agent is more than just the perfect resource for first-time buyers looking to get an approved mortgage fast! Your Canadalend.com agent can continue to be a great support, helping answer your questions and providing you with advice or referrals. At Canadalend.com, our goal is to help you achieve your short- and long-term financial goals.

What should first-time buyers look for when it comes to getting a mortgage? The nearest independent, licensed Canadalend.com agent!

After five years of historically low interest rates, Canadians are beginning to realize the low-interest-rate party is about to end. In 2007, Canadian interest rates fell to near-historic lows after the U.S. housing bubble burst. Now that the North American economy is regaining its health, interest rates are starting to rebound.

For example, in May 2007, a five-year Government of Canada benchmark bond yielded 4.53%. Since then, government interest rates in Canada have been dropping lower; by May 2011, the yield had fallen to 2.4%, in May 2012, 1.31%, and in May 2013, it dipped below 1.2%.1

But, Canadalend.com warns, Canadian homeowners shouldn’t get used to these historic lows. In fact, over the last few weeks, interest rates have turned a corner and are now rising at their quickest pace in years.

On Friday, June 21, 2013, a five-year Government of Canada benchmark bond returned 1.81%. That means that since this past May, the yield on a five-year Government of Canada benchmark bond has climbed 50%! Additionally, since May, the seven-year Government of Canada benchmark bond has increased more than 50%. While a 10-year Government of Canada benchmark bond has also increased approximately 50%.2

It’s important to be aware of the Government of Canada benchmark bond yields because they are the rates at which retail banks borrow money from each other and form the basis for saving and lending rates that get passed on to customers.

Why the sharp increase? On June 7, Statistics Canada showed that the Canadian economy had added 95,000 new jobs in May—a number much higher than previously forecasted. That high number is a strong sign that the Canadian economy is doing well.3

But perhaps most significant, on May 22, the U.S. Federal Reserve hinted that it was going to begin tapering off its $85.0 billion per month quantitative easing (bond buying) program. Furthermore, the Federal Reserve said it might end the stimulus program altogether in 2014.

As soon as the largest economy in the world—the U.S.—announces it is improving, interest rates in Canada will to start to tick higher, Canadalend.com observes. If this last month is any indicator, the rates could begin rising more quickly than many Canadians expect, which might negatively impact unprepared Canadian borrowers.

What that means is that anyone with a variable rate loan will have to pay more each month—stretching already strained budgets. For example, if you have a $100,000 mortgage, every one percent increase in interest rates translates into an annual increase of $1,000.

Today, most of the big banks charge prime plus one percent for a five-year variable rate mortgage; for example, with prime at three percent, that would mean you pay four percent. So, with the economy improving, banks are going to start charging more to borrow.

How high will interest rates go? Back in the fall of 2007, just before the U.S. housing bubble popped, the prime rate in Canada was around 6.25%. That means that a variable mortgage rate cost the average Canadian 7.25% to carry—81% more than today.

Besides up, where does Canadalend.com see interest rates heading? Over the short term, it wouldn’t be a surprise to see them return to their pre-recession highs from earlier in 2007.

To avoid paying the higher interest rates that are on the horizon, first-time homeowners and those looking to refinance should consider contacting their local Canadalend.com agent and seeing about locking in a longer term mortgage now.

At Canadalend.com, our experience has taught us that, when it comes to picking a mortgage, it’s better to be proactive than reactive—do whatever you can to save your money from rebounding interest rates. Whether you need a big or small mortgage, want it to be fixed or variable, Canadalend.com’s independent, licenced agents can help navigate the often confusing world of mortgages.

In fact, because Canadalend.com agents are independent, they are able to work with all the major banks and lending institutions to help you pick the financial products that best suit your budgetary needs. Our agents will also try to get you approved in 24 hours.

At Canadalend.com, we want to help you achieve your financial goals—both now and in the future. Take advantage of lower interest rates while you still can, and contact your nearest licenced, independent Canadalend.com agent.

Sources:

1. 1. “Canadian bond yields: 10-year lookup,” Bank of Canada web site, last accessed June 25, 2013,http://www.bankofcanada.ca/rates/interest-rates/lookup-bond-yields/ .

• “Government of Canada marketable bonds – average yield – 1 to 3 year,” Bank of Canada web site, last accessed June 25, 2013, http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/ .
• “Labour Force Survey, May 2013,” Statistics Canada press release, June 7, 2013, http://www.statcan.gc.ca/daily-quotidien/130607/dq130607a-eng.htm.

Only a few months later and we’ve experienced a significant interest rate hike from the Bank of Canada. To compound matters, other lenders have followed their lead and increased their interest rates.

This hike should affect all loans and saving products sold by Canadian banks.

What Led to the Interest Rate Increase?

This was the first interest rate hike in years and the resulting fallout is complex with potentially major implications.

Part of the rate increase is due to a rebound in the economy. As oil prices rebound somewhat since its 2014 plunge and the housing market’s dip seems minimal, there are signs that the Canadian economy has bounced back from its recession.

These measures are also an attempt to curb the debt load of Canadians, to spur savings and to strengthen pensions. These all suffered when interest rates were low and people took advantage by loading up on debt.

Where are Interest Rates Headed?

As we’ve recently learned, these things are tough to predict even for financial experts. Remember, pundits called for rates to stabilize beyond 2018 but a hike hit Canadians in July 2017.

Mortgage rates might continue to climb throughout the rest of the year and into 2018 due to North America’s economic expansion. Desjardins Bank has suggested that the rate could reach 5% by 2019.

It might be best to lock into a fixed rate, if possible.

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What will Other Lenders Do?

This will most likely be a case of follow the leader. In fairness to lenders, they have also lowered rates in conjunction with the Bank of Canada when they were not required to. It would be surprising to see any lender not try to keep pace.

There’s no need to panic. As easily as rates could increase, they could also lower or stabilize. This is an opportunity to look for some value in the housing market or to save for longer or at better rates.

iStock.com/sorbetto

In the fall of 2017, news broke that the Bank of Canada was raising its interest rate. Even though borrowers shouldn’t expect another hike this year, the rate seems to have reached a level that could affect a lot of Canadians and their financial situation. The new interest rate is a departure for Canadians who have been enjoying a lower rate for several years now.

How have Canadians responded to the new interest rate and what can they expect in the first two quarters of 2018? What does this rate hike mean for borrowers with a home equity loan or line of credit?

Have Canadians Adjusted? 

Many Canadians saw their mortgage and loans become more expensive overnight, which shrank their cash flow and increased their monthly expenses. Even a half a percentage hike can apply quite a bit of pressure on borrowers.

Based on the changes to the housing market and early reports from the Bank of Canada, Canadians have adjusted well and might have even been prepared for a market adjustment.

The 2018 Interest Rate Outlook

After two rate increase, the remainder of 2017 should stabilize for borrowers, but early 2018 could see another rate increase. The Bank of Canada has been non-committal about what Canadians should be prepared for in 2018, but the door is open for more hikes based on Canada’s strong economic showing and soaring commercial showing.

Do Borrowers Need to Panic or Plan?

Borrowers should stay the course and continue to borrow or pay off debt based on their current financial structure. Saving more money or reviewing monthly expenses is always advisable, but there is no need to panic.

If you weathered the rate hike in September, then you have most likely dealt with the worst of it. 2018 will come with some challenges but there shouldn’t be too many major surprises.

Contact one of Canadalend’s home equity or mortgage experts to learn more about home equity loans or lines of credit or to better understand how the current interest rate would work with your mortgage approval.