Rates have substantially increased over the last 6 of months. We have seen 3 prime rate increases with more on the horizon. Fixed rate mortgages have also followed suit due to bond market instability and the increases are noticeable. Consumer sentiment has rapidly moved from Adjustable rate products to longer term Fixed rates of 5 years or greater. The advantage of Fixed rate is that they provide clients with added security and stability against this recent storm of volatility. This storm doesn’t seem to have an end in sight either with many questions still to be answered in the coming months. When will bond rates stabilize? Will global pressures continue to drive increases? Will we see a return to historical norms? What will be the impact of NAFTA negotiations/deterioration on the Canadian economy?

If clients you are concerned these days it’s with good reason. Perhaps the interim answer to all this instability and volatility is to start looking long “term”. 7 & 10 year terms to be specific. Longer term mortgages like a 10 year term help insulate you against potential increases in the short to long-term as well as provide safety and consistency with mortgage payments that won’t fluctuate with the market. We don’t have to go back very far (6-7yrs) to a time when 10 year mortgages were a very popular and attractive option. During that period of time many case studies show this product didn’t work out for those borrowers who selected those 10 year terms, however there was a major difference between that period of time and today. 6-7 years ago we were in a more stable rate environment and there was very little difference between the 5 & 10 year rates at the time. Shortly after this period, rates quickly dropped to even further all-time lows. Compare those details to our current market situation and it becomes quickly apparent rates have been continually rising with more sustained increases forecasted. So a 7 or 10 year mortgage option today might be work a good look. The 7 yr rates especially are very close to the same as 5 year rates.

7 & 10 year term mortgages give you:
• Security
• Stability
• Protection against rising rates
• Providing cost certainty as part of long term financial plan
• Protection against future legislated rule changes
• Portability options while maintaining their competitive rate
• Standard penalty calculations
• 20% lump sum payment
• 20% payment increases

Contact me to discuss your specific situation more at gregory.ero@dominionlending.ca