Preparing for Higher Rates
Given inflationary pressures, the Bank of Canada indicated in their last rate announcement that rate hikes could continue to take place if inflation does start to rise again. This means don’t put your celebratory hat on just yet. We may not have seen our last Bank of Canada increase. Views among many economists are that we have reached the peak in our rate-increasing cycle, and we will likely see rates drop before we see the inflationary standard of 1-3%.
With so many factors affecting inflation, I believe in taking it one day at a time and being prepared for what is most likely. We will most likely not see the interest rates many of us have been accustomed to. As your local Kamloops mortgage broker here are my tips on preparing for renewing in a higher interest rate environment.
How Can You Prepare Yourself for Renewing in a Higher Interest Rate Environment?
If you are currently in the middle of your mortgage term, there are ways that you can be proactive in preparing yourself for your upcoming mortgage renewal.
With variable-rate mortgages, as rates rise, so will the interest you pay. While your payment often doesn’t increase, you’ll pay less principal and more interest.
Fixed-rate mortgages – based on the bond market, if you have a fixed-rate mortgage, you aren’t affected until it’s time to renew.
Consider taking advantage of your prepayment privileges and increasing your payment so that at renewal, you are accustomed to paying the higher amount.
What if My Mortgage Is Coming Due for Renewal?
As homeowners, we are aware of when that impending day of renewal is coming.
Given our current higher interest rate environment, there are ways we can set ourselves up for success.
- Talk with a mortgage professional early. Ideally, 4-6 months before your renewal date.
If you have acquired a significant amount of debt since your last mortgage renewal, it is wise to talk to a mortgage professional sooner—12 months in advance. Strategic planning could save your credit score and help you to plan for a higher monthly payment.
- Rate research: a mortgage broker is going to do this for you. If you are working with the bank, ensure you compare rates.
- Review your financial goals.
During your mortgage term, will you be retiring? Will you be downsizing your home? Are you hoping to help a child through their post-secondary education? Do you plan on doing a significant renovation? Planning appropriately on renewal can save you money down the road.
- Be ready to negotiate, is another excellent reason to use a mortgage professional. Don’t be afraid to do this on renewal with your current lender.
- Mortgage Broker’s services are free for the most part. It is in the rarest of circumstances that an individual will inquire a fee.
Don’t feel rushed or pressured by a renewal letter or call. Let’s discuss your options. We’ll review your renewal offer together, and I’ll shop around to see if it’s the best deal available. Do you have too much other debt? This may be the time to roll it into a new mortgage to boost cash flow and save on interest costs.
I discuss ways to prepare for renewing in a higher interest environment on CFJC Midday. You can watch it here.
Should we talk?
Yes, for sure. You should have confidence in your mortgage plan, and that’s why professional mortgage advice is so critical. I have access to a wide range of lenders and know the right questions to ask to assess your situation and make sure you have the best mortgage strategy for whatever is ahead. Let’s talk today.
