Ontario Mortgage Rates - Part 2 - When to lock into a fixed rate mortgage

When to lock-in to a fixed rate mortgage is a tough decision that should be thought through. An individual’s housing payment is usually the largest monthly payment in their budget.

Ontario Mortgage rates have been low for a long time so those who have chosen variable rate mortgages have enjoyed less mortgage interest than their counterparts, who selected the safer, fixed rate mortgage option.

Variable mortgage rates are great when interest rates are low. The difficulty occurs if mortgage rates go up. For example, a family who is living paycheque to paycheque should not have a variable rate mortgage.

Fixed rate mortgages have slightly higher interest rates but because the interest is fixed, so is the monthly mortgage payment. Families who have fixed rate mortgages do not have to worry that if interest rates increase so will their mortgage payment.

People choose variable rate mortgages because the rates are lower, low Ontario Mortgage Rates means lower monthly payments and more repayment to mortgage principal.

Variable rate mortgages fluctuate with the Bank of Canada’s lending rate. The Bank of Canada adjusts its lending rate according to the state of the economy. They consider not only the national economy but also the world economy.

For example, some have speculated that because the Canadian economy is doing better that interest rates will continue to rise (the Bank of Canada has raised its lending rate 3 times in the past year).

It is true that in Canada the economy has seen some improvement. However, this doesn’t mean that rates will continue to go up. In fact many believe that they will stay the same or perhaps they may even go down.

Many experts, including us, believe that in fact they will stay the same or even go down. With continued instability in countries such as Greece and the United States (debt talks), the Canadian Dollar will only continue to strengthen. This will hurt our manufacturing sector and local economy simply because no one wants to manufacture here when the exchange rate is so high. This in turn will result in The Bank of Canada leaving their lending rate as is or perhaps even reducing it in the near future.