Getting a great mortgage rate?
How low can you go? That’s the question Canadians are asking their banks these days, and rightfully so, with mortgage rates hovering on historic lows. Home buyers who were priced out of the market not too long ago are now wide-eyed and chomping at the bit to seize an opportunity for that oh-so elusive home ownership dream.
That opportunity comes in the form of an affordable mortgage rate, where naturally, buyers are picking up the phone and clicking on their banking apps to make appointments with their big banks’ mortgage specialists. Seemingly everyone is in a mad dash to get pre-approved ASAP.
Of course, it’s still a process and there are some things to consider before making such a huge commitment. Let’s be honest, it’s all about not living with any type of regret as the days and years pass. The best way to do that? Educate yourself and arm yourself with knowledge and resources to make the best decision possible.
Why are mortgage rates so low?
First things first, how exactly did we get to a point where mortgage rates are so low? The short answer is that the Covid-19 crisis hurt the economy, and lowering the interest rate was a practical way to support and encourage the economy in a positive direction.
According to Reuters, the benchmark interest rate was slashed by the Bank of Canada to a record low 0.25% as the pandemic ensued. And mortgage rates began pleasantly plummeting as a result. (1)
Keep in mind lenders and financial institutions are competing with each other to attract prospective buyers. This coupled with most major population markets struggling with an increasingly worrisome lack of housing supply and skyrocketing prices, particularly in the inflated bubbles of Toronto and Vancouver, and you have a recipe for affordable mortgage rates being there for the taking.
More good news? Well, it appears that the Bank of Canada is giving every indication these rates are here to stay for the foreseeable future. That said, as the pandemic is getting light at the end of the tunnel, the benchmark interest rate will eventually have to rise to avoid inflation. But as of now, according to this CBC article, the bank of Canada intends to hold the interest rate until the economy is recovered, possibly during the second half of 2022. (2)