It's Time to Lock In

It's Time to Lock In


With people banking on the main interest rate going up in June, it seems like a good time to for homeowners to lock in their fixed-rate mortgages.

In the past year about 12 percent of mortgage holders with fixed-rate mortgages "locked in," or switched from variable rate mortgages, according to a report by Will Dunning, chief economist at CAAMP, and another 10 percent had already switched from a variable rate more than a year ago.

The rate for conventional five-year mortgages was at 6.25 per cent at the end of April -- that's near ing the 5.25 per cent rate at the end of May last year - the lowest since 1973 when the Bank of Canada data began.

"As interest rates rise, expect home buyers to increasingly opt for fixed-rate loans, in turn leaving banks with more fixed-rate assets to hedge in the swap market" said Mohammed Ahmed, a rates strategist at Canadian Imperial Bank of Commerce in Toronto.

Housing starts rose to a seasonally adjusted annual pace of 201,700 units last month.

8 Comments
  • Liam 2010-05-13 2:14:10 AM
    Maybe I'm missing something, but considering the direction of rates, wouldn't 6.25 have surpassed the conventional, non-discounted mortgage rate of 5.25 available in May of last year?
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  • Marc 2010-05-13 2:29:14 AM
    What is all the panic to lock mortgages into fixed rates? Sure interest rates will start rising, they have no where else to go, but I have not heard anyone saying that these rate hikes will be aggresive and fast. Being in a variable of 1.70% today is way better than being locked into a 5 year fixed of 4.4%. That's a difference of 2.7%!!! It will take 10 rate increases or so for the variable to just reach the same level. The question is how many years will it take for rates to increase 10 times?
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  • Don Bayer 2010-05-13 2:55:09 AM
    I agree with Marc. Individuals should attain access to a broad range of information prior to paying such a high premium for security. One could increase the prime rate 15 or 20 times over a five year period and still have a lower balance at maturity. If your having trouble sleeping at night,buy a blanket and not a Bank's most profitable term.
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