“The advice we give to clients is that when rates are low is the time to bang down their mortgage,” Feisal Panjwani of Invis Feisal and Associates told MortgageBrokerNews.ca. “When rates increase, the interest portion of the payment will be higher.”
Record-low rates have contributed to a decrease in Canadians choosing to accelerate their mortgage payments, according to a CIBC poll released Monday, though the bank suggests taking the opportunity to take advantage and pay them down quicker.
According to the poll – which surveyed 1,509 randomly selected participants -- 55 per cent of Canadians who currently have a mortgage are taking actions to repay them faster, down from 68 per cent in a similar poll from 2013. 23 per cent accelerated their payment frequency (down from 42 per cent); 28 per cent increased the payment amount (down from 30 per cent); 18 per cent made lump sum payments (down from 15 per cent).
And while it may be enticing for homeowners to take advantage of smaller payments, brokers warn clients that inevitable rate should be prepared for by paying down as much of the debt as possible.
“I totally agree – this is the time to pay as much as possible,” Fred Testa of Invist told MortgageBrokerNews.ca. “I got my daughter a mortgage last year at a low rate and they know it’s not a question of ‘if’ but ‘when’ rates go up and they’ve increased their payments so that when rates go up there won’t be as much of a payment shock.”
One exception, according to Panjwani, is when clients have outstanding consumer debt with higher interest rates.
“If they have additional debt outside their mortgage they should pay that off,” Panjwani said. “Eliminate high interest rates first.”
But are enough brokers echoing these same sentiments?
Strangley enough, brokers are echoing the sentiments of a big bank and warning clients not to follow a recent trend.